Cost- push inflation starts with
A) a decrease in aggregate demand.
B) a decrease in short- run aggregate supply.
C) an increase in aggregate demand.
D) an increase in short- run aggregate supply.

Question

Quizplus · Accepted Answer

Cost-push inflation is caused by a decrease in short-run aggregate supply, which leads to an increase in the price of goods and services due to higher production costs. This can be caused by factors such as an increase in the cost of raw materials or an increase in taxes or regulations that increase the cost of production. A decrease in aggregate demand (option A) would lead to deflation rather than inflation, and an increase in aggregate demand (option C) would lead to demand-pull inflation. An increase in short-run aggregate supply (option D) would lead to a decrease in the price level, not an increase.

Cost- Push Inflation Starts with