When the price of a key input increases suddenly, it causes:
A) cost-push inflation.
B) the business cycle to become sporadic.
C) demand-pull inflation.
D) the velocity of money to rise.

Question

Quizplus · Accepted Answer

An increase in the price of a key input causes cost-push inflation as it drives up the cost of production for businesses, leading to an increase in prices for goods and services. This type of inflation is caused by a decrease in the aggregate supply.

When the Price of a Key Input Increases Suddenly, It