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Why does indirect taxation cause cost push inflation?
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#2
higher indirect taxes -> higher employment costs for firms -> lower SRAS = cost push inflation
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(Original post by adam_winterb)
higher indirect taxes -> higher employment costs for firms -> lower SRAS = cost push inflation
higher indirect taxes -> higher employment costs for firms -> lower SRAS = cost push inflation
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#4
(Original post by Rebeccacrossxx)
Why do employment costs rise?
Why do employment costs rise?
This means higher costs for firms, causing SRAS to shift left/up.
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#5
A indirect tax is a tax on spending such as VAT and excise duty.An increase in these types of taxes increases costs to producers. For example, if VAT was higher than 20% then prices of raw materials will rise causing the cost of production to also rise.Producer then increase their prices in order to maintain there profit margin and make a ‘healthy’ profit, thus causing cost push inflation.
I wouldn’t use the other poster’ response because I don’t think it’s applicable towards an indirect tax. He should of said it costs more to obtain raw materials for producers not having to pay tax on per unit that they produce
I wouldn’t use the other poster’ response because I don’t think it’s applicable towards an indirect tax. He should of said it costs more to obtain raw materials for producers not having to pay tax on per unit that they produce
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