In a cost-push inflation,
A) decreases in SAS lead to increases in AD.
B) decreases in AD lead to increases in SAS.
C) increases in AD lead to increases in SAS.
D) increases in SAS lead to decreases in AD.

Question

Quizplus · Accepted Answer

Cost-push inflation occurs when the short-run aggregate supply (SAS) decreases due to rising production costs, leading to higher prices and reduced output, which can indirectly cause an increase in aggregate demand (AD) as the economy adjusts.

In a Cost-Push Inflation