When cost-push inflation starts, real GDP ________ and the unemployment rate ________.
A) increases; falls
B) does not change; does not change
C) does not change; falls
D) decreases; falls
E) decreases; rises

Question

Quizplus · Accepted Answer

Cost-push inflation occurs when the costs of production increase, leading to higher prices. This often results in decreased demand for goods and services, causing real GDP to decrease and the unemployment rate to rise as businesses cut back on production and potentially lay off workers.

When Cost-Push Inflation Starts, Real GDP ________ and the Unemployment