When does cost push in?ation occur in an economy?
A) When a fall in aggregate demand leads to an increase in overall prices.
B) When a rise in aggregate supply leads to an increase in overall prices.
C) When a rise in aggregate demand leads to an increase in overall prices.
D) When a fall in aggregate supply leads to an increase in overall prices.

Question

Quizplus · Accepted Answer

Cost-push inflation occurs when there is a decrease in aggregate supply (potential output), which leads to an increase in overall prices. This can happen due to reasons like increased production costs or shortages of inputs.

When Does Cost Push In?ation Occur in an Economy