Increased labor costs and money increases inflation

Jackie Benson, "The Economics of Inflation and the Risks of Ballooning Government Spending," United States Joint Economic Committee, 10-06-2021, https://www.jec.senate.gov/public/index.cfm/republicans/2021/10/the-economics-of-inflation-and-the-risks-of-ballooning-government-spending-- 嘉玮

What Causes Inflation?

To better understand whether this rising inflation is simply a temporary phenomenon or the direct result of government intervention, it is important to first understand two different types of inflation.

The first is cost-push inflation, which happens when the cost of production rises. Cost-push inflation can occur if businesses are faced with sudden rising prices for raw materials, intermediate goods, or labor, and pass those higher costs on to consumers. This type of inflation may be sustained if it is the result of a lasting policy change, such as new taxes on foreign-made inputs, but it can also be a temporary response to an exogenous shock, such as supply chains adjusting to the re-opening of the global economy.

The second is demand-pull inflation, caused by increases in consumer demand. Demand-pull inflation can be a sign of growth if it is the result of a strong economy in which more individuals are employed, income rises, and demand rises with it. But it can also be harmful if it is triggered by new government policies that provide consumers with so much money (subsidies and transfer payments, or easy access to credit via a low cost of borrowing) that demand grows too fast for production to keep up.