At the start of a cost- push inflation,
A) the price level rises and real GDP does not change.
B) the price level and real GDP both increase.
C) only real GDP changes while the price level remains constant.
D) the price level rises and real GDP decreases.

Question

Quizplus · Accepted Answer

Cost-push inflation occurs when production costs increase, leading to a decrease in aggregate supply. This results in higher prices (inflation) and a reduction in real GDP as output decreases.

At the Start of a Cost- Push Inflation