During cost-push inflation, aggregate output _____ and the aggregate price level _____.
A) rises; rises
B) rises; falls
C) falls; falls
D) falls; rises

Question

Quizplus · Accepted Answer

During cost-push inflation, the costs of production increase due to factors such as increased wages or raw material costs. As a result, firms have to increase prices to maintain their profit margins, leading to a decrease in aggregate output and an increase in the aggregate price level. Therefore, choice D (falls; rises) is the correct answer.

During Cost-Push Inflation, Aggregate Output _____ and the Aggregate Price