A sharp rise in fuel prices increases the general price level in an economy. This is an example of:
A) cost push inﬂation.
B) demand pull inﬂation.
C) stagﬂation.
D) deﬂation.

Question

Quizplus · Accepted Answer

Cost-push inflation occurs when the prices of production inputs increase, leading to an increase in the general price level as producers pass these costs onto consumers. A sharp rise in fuel prices is a classic example of a cost increase that can lead to cost-push inflation.

A Sharp Rise in Fuel Prices Increases the General Price