Cost-Push Inflation Cost-push inflation is represented by an initial decline in short-run aggregate supply from SRAS₀ to SRAS₂. Rising resource costs or inflationary expectations will reduce short-run aggregate supply, resulting in a short-run movement from point e to point b. If policymakers wish to return the economy to full employment, they can increase aggregate demand to AD₁, but must accept higher prices as the economy moves to point c. Alternatively, they could reduce aggregate demand, but that would lead to lower output and lower employment.