'Cost-push inflation' can be caused by:
A)insufficient demand leading to falling profits for producers; therefore, producers have to raise their prices to continue to be profitable.
B)increases in aggregate supply.
C)real wage increases that are higher than increases in productivity growth.
D)very high levels of aggregate demand in the short-run.

Question

Quizplus · Accepted Answer

Cost-push inflation occurs when there is an increase in the cost of production, which leads to increased prices for consumers. Real wage increases that are not matched by increases in productivity growth can push up production costs, leading to cost-push inflation. Option A is referring to demand-pull inflation, where prices are pushed up due to high demand. Option B is incorrect as this would lead to a decrease in prices, not an increase. Option D is also incorrect as high levels of demand would lead to demand-pull inflation, not cost-push inflation.

'Cost-Push Inflation' Can Be Caused By