In a cost- push inflation,
A)increases in SAS lead to decreases in AD.
B)increases in AD lead to increases in SAS.
C)decreases in AD lead to increases in SAS.
D)decreases in SAS lead to increases in AD.

Question

Quizplus · Accepted Answer

Cost-push inflation occurs when production costs increase, leading to a decrease in the short-run aggregate supply (SAS), which can result in higher prices and potentially an increase in aggregate demand (AD) as consumers and businesses adjust to the new price levels.

In a Cost- Push Inflation