Supply-side inflation could be caused by which of the following?
A) An increase in aggregate demand
B) A decrease in aggregate demand
C) An increase in long-run aggregate supply
D) A decrease in long-run aggregate supply

Question

Quizplus · Accepted Answer

Supply-side inflation is a type of inflation that comes from a decrease in the long-run aggregate supply. This decrease could be caused by factors such as a decrease in productivity, an increase in the cost of production inputs, or a decrease in investment. An increase in aggregate demand (choice A) could cause demand-pull inflation, which is a different type of inflation. A decrease in aggregate demand (choice B) could actually decrease inflation. An increase in long-run aggregate supply (choice C) could also decrease inflation.

Supply-Side Inflation Could Be Caused by Which of the Following