Other things constant, an increase in resource prices will
A) increase the demand for goods and services.
B) increase the cost of producing goods and services, which will lead to a higher price level.
C) reduce costs and improve profit margins, which will lead to an increase in aggregate supply in the goods and services market.
D) cause the natural rate of unemployment to rise.

Question

Quizplus · Accepted Answer

An increase in resource prices leads to an increase in the cost of producing goods and services, which in turn leads to a higher price level due to firms passing on the increased costs to consumers. This is known as cost-push inflation.

Other Things Constant, an Increase in Resource Prices Will