For a cost-push inflation to occur, oil price increases must be accompanied by
A) increases in government expenditures.
B) increases in the quantity of money.
C) lower personal tax rates.
D) decreased investment spending.

Question

Quizplus · Accepted Answer

Cost-push inflation occurs due to an increase in production costs, mainly due to an increase in the price of inputs such as oil. An increase in the quantity of money in circulation will lead to demand-pull inflation, which is not related to the increase in production costs. Increases in government expenditures, lower personal tax rates, and decreased investment spending may impact the overall economy but are not directly related to cost-push inflation.

For a Cost-Push Inflation to Occur, Oil Price Increases Must