Cost-push inflation is the result of:
C)high aggregate demand.
B)low aggregate demand.
C)favorable supply shocks.
D)adverse supply shocks.

Question

Quizplus · Accepted Answer

Cost-push inflation is the result of adverse supply shocks, such as an increase in the cost of production inputs like labor or raw materials, which leads to higher production costs and therefore higher prices. High aggregate demand can lead to demand-pull inflation, which is a different type of inflation. Low aggregate demand can lead to deflation or disinflation, not cost-push inflation. Favorable supply shocks, such as a decrease in the cost of production inputs, can lead to lower production costs and therefore lower prices, which is the opposite of cost-push inflation.

Cost-Push Inflation Is the Result Of