Unlike demand-pull inﬂation, cost-push inﬂation
A) causes the supply of goods and services to decline.
B) drives up the price level.
C) increases nominal income.
D) increases real income.

Question

Quizplus · Accepted Answer

Cost-push inflation occurs when the costs of production increase, leading to a decrease in the supply of goods and services as producers reduce output or pass on the higher costs to consumers in the form of higher prices. This contrasts with demand-pull inflation, which is driven by an increase in demand across the economy.

Unlike Demand-Pull Inﬂation, Cost-Push Inﬂation