wage–price spiral

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The tendency during inflation for wage increases to lead to price increases and for price increases to lead to wage increases, thus creating an inflationary spiral. Wage increases tend to raise prices in their own industry by increasing costs, and in other industries by increasing demand. Price increases tend to lead to wage increases by increasing both the cost of living and the ability of employers to afford to pay higher wages. This makes cost inflation hard to stop once it has begun.

Subjects: Economics.

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