What are the primary effects of cost-push inﬂation?
A) It raises real output and redistributes an increased level of real income.
B) It reduces real output and redistributes a decreased level of real income.
C) It raises real output but redistributes a decreased level of real income.
D) It reduces real output but redistributes an increased level of real income.

Question

Quizplus · Accepted Answer

Cost-push inflation occurs when the cost of producing goods and services increases, leading to a decrease in supply or output. This can be caused by factors such as an increase in the price of raw materials, wages, or taxes. With a decrease in supply or output, prices increase, leading to a decrease in purchasing power and a redistribution of real income. Therefore, cost-push inflation reduces real output and redistributes a decreased level of real income.

What Are the Primary Effects of Cost-Push Inﬂation