Cost-push inflation is a situation in which the
A) short-run aggregate supply curve shifts rightward.
B) aggregate demand curve shifts rightward.
C) short-run aggregate supply curve shifts leftward.
D) aggregate demand curve shifts leftward.

Question

Quizplus · Accepted Answer

Cost-push inflation is caused by an increase in the cost of production, such as an increase in wages or raw material prices, which leads to a decrease in the supply of goods and services at the existing price level. This shift of the short-run aggregate supply curve to the left results in higher prices and lower output, causing a decrease in real GDP. Therefore, the correct answer is C, as the short-run aggregate supply curve shifts leftward.

Cost-Push Inflation Is a Situation in Which the