With cost-push inﬂation, there will be
A) an increase in real GDP.
B) a leftward shift in the aggregate demand curve.
C) a decrease in real GDP.
D) a decrease in unemployment.

Question

Quizplus · Accepted Answer

Cost-push inflation occurs when there is an increase in production costs, such as wages or raw material prices. This causes a decrease in real GDP because businesses have to raise prices to maintain their profit margins, which leads to a decrease in consumer purchasing power and a decrease in overall economic activity. It does not necessarily result in a leftward shift in the aggregate demand curve, as this would depend on other factors influencing the economy. It may also not lead to a decrease in unemployment, as businesses may respond to cost-push inflation by reducing their workforce or investment in new ventures.

With Cost-Push Inﬂation, There Will Be