When a cost- push inflation starts
A) the short- run aggregate supply curve shifts rightward.
B) prices fall even though money wages may rise.
C) real GDP rises faster than the quantity of money.
D) prices rise and real GDP decreases.

Question

Quizplus · Accepted Answer

With cost-push inflation, prices rise due to an increase in production costs, such as wages or raw material prices. This decrease in profitability can cause firms to reduce output, leading to a decrease in real GDP. Therefore, the correct answer is D, prices rise and real GDP decreases.

When a Cost- Push Inflation Starts