Refer to the above diagram.The initial aggregate demand curve is AD₁ and the initial aggregate supply curve is AS₁.Cost-push inflation in the short run is best represented as a: A)leftward shift of the aggregate supply curve from AS₁ to AS₂. B)rightward shift of the aggregate demand curve from AD₁ to AD₂. C)move from d to b to a. D)move from d directly to a.

Question

Quizplus · Accepted Answer

Cost-push inflation is caused by an increase in production costs, such as wages or raw material prices, leading to a decrease in aggregate supply. This is represented by a leftward shift of the aggregate supply curve from its initial position, AS₁, to a new position, AS₂. Therefore, choice A is the correct answer. The other options do not accurately represent cost-push inflation.

Refer to the Above Diagram