Initially in a cost- push inflation
A) the price level and real GDP both increase.
B) the price level rises and real GDP decreases.
C) only real GDP changes while the price level remains constant.
D) All of the above answers are correct.

Question

Quizplus · Accepted Answer

In a cost-push inflation, the increase in the cost of production leads to a decrease in the supply of goods and services, causing the price level to rise. As a result, real GDP decreases. Therefore, option B is the correct answer.

Initially in a Cost- Push Inflation