The concept of cost-push inflation cannot be explained by the aggregate expenditure model.

Question

Quizplus · Accepted Answer

The aggregate expenditure model focuses on the relationship between total spending and output. It does not take into account factors such as production costs, wages, and supply shocks, which are the main drivers of cost-push inflation. Therefore, the concept of cost-push inflation cannot be explained by the aggregate expenditure model.

The Concept of Cost-Push Inflation Cannot Be Explained by the Aggregate