At the start of a cost-push inflation,
A) real GDP increases faster than the quantity of money.
B) prices and unemployment are rising.
C) productivity rises.
D) the short-run aggregate supply curve shifts rightward.

Question

Quizplus · Accepted Answer

Cost-push inflation occurs when production costs increase, which results in a decrease in the supply of goods and an increase in their price. This leads to inflationary pressures and rising prices. At the start of cost-push inflation, both prices and unemployment are rising, as businesses pass on their higher costs to consumers in the form of higher prices. Real GDP and productivity may not be immediately affected, as the increase in prices may take some time to impact consumers' spending and businesses' profits. The short-run aggregate supply curve may shift leftward, as production costs, such as wages and materials, become more expensive for businesses.

At the Start of a Cost-Push Inflation