Which of these 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 overall price levels in an economy rise due to increases in the cost of wages and raw materials. Choice C, "Strict new environmental regulations require that firms change their production methods," would likely increase production costs for firms, which could then lead to higher prices for consumers, thus causing cost-push inflation.

Which of These Would Cause Cost-Push Inflation