Cost-push inflation occurs when the:
A) aggregate demand curve shifts leftward while the aggregate supply curve is fixed.
B) aggregate supply curve shifts leftward while the aggregate demand curve is fixed.
C) aggregate demand curve shifts rightward while the aggregate supply curve is fixed.
D) aggregate supply curve shifts rightward.

Question

Quizplus · Accepted Answer

Cost-push inflation occurs when there is a decrease in aggregate supply caused by an increase in the cost of production, such as an increase in wages or raw materials. This results in higher prices for goods and services, leading to inflation. Therefore, the correct answer is when the aggregate supply curve shifts leftward while the aggregate demand curve is fixed, which is option B.

Cost-Push Inflation Occurs When The