Which of the following would cause cost-push inflation?
A) Optimism leads consumers to spend more.
B) Firms cut back on investments to cut costs.
C) Strict new environmental regulations require that firms change their production methods.
D) Consumers face rising costs when purchasing food and using transportation.

Question

Quizplus · Accepted Answer

Cost-push inflation occurs when the costs of production increase, leading to a decrease in the aggregate supply of goods and services. Strict new environmental regulations can increase production costs, causing firms to raise prices, which leads to cost-push inflation.

Which of the Following Would Cause Cost-Push Inflation