Cost-push inﬂation is characterized by a(n)
A) increase in aggregate supply and a decrease in aggregate demand.
B) increase in aggregate demand and no change in aggregate supply.
C) decrease in aggregate supply and no change in aggregate demand.
D) decrease in both aggregate supply and aggregate demand.

Question

Quizplus · Accepted Answer

Cost-push inflation occurs when there is a decrease in aggregate supply. This is typically caused by an increase in the cost of production inputs, such as labor or raw materials. As a result of the decrease in aggregate supply, producers must raise their prices to maintain profitability, causing an increase in overall price level. There is no change in aggregate demand in cost-push inflation.

Cost-Push Inﬂation Is Characterized by A(n)