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INCREASING IN CONSUMER PRICE INDEX Meanwhile, headline inflation is projected to average higher, between 2.5% and 4% in 2021, due mainly to cost-push factors, such
INCREASING IN CONSUMER PRICE INDEX" Meanwhile, headline inflation is projected to average higher, between 2.5% and 4% in 2021, due mainly to cost-push factors, such as an expected increase in global oil and commodity prices, as well as the lapse of the effect of the tiered electricity tariff rebate introduced in April 2020. "In terms of trajectory, headline inflation is anticipated to temporarily spike in the second quarter of the year, following a lower base from low domestic retail fuel prices during the corresponding period in 2020, before moderating by the second half of the year as this base effect dissipates," said BNM. Underlying inflation, as measured by core inflation, is, however, expected to remain subdued, averaging between 0.5% and 1.5% amid continued spare capacity in the economy. Malaysia's headline inflation was negative at -1.2% in 2020, primarily due to a decline in global oil prices, while underlying inflation remained subdued at 1.1% last year amid spare capacity in the economy and weaker labour market conditions. a)Based on the article, explain the three (3) factors that causes a cost-push inflation. (12 markah/marks) b) With using a diagram, explain how cost-push inflation happen and how government implement policy to solve the problem of cost-push inflation. Show the effect to the aggregate demand and aggregate supply (AD-AS) curve
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