Inﬂation initiated by increases in wages or other resource prices is labeled
A) demand-pull inﬂation.
B) demand-push inﬂation.
C) cost-push inﬂation.
D) cost-pull inﬂation.

Question

Quizplus · Accepted Answer

Inflation initiated by increases in wages or other resource prices is labeled cost-push inflation. This is because the increase in the cost of production for firms leads to an increase in the prices of goods and services, as they pass on the increased costs to consumers. It is also sometimes referred to as supply shock inflation. A and B are incorrect as they refer to demand (i.e. consumer spending) as the initiator of inflation, whereas C correctly identifies cost as the factor. D is not a commonly used term in economics.

Inﬂation Initiated by Increases in Wages or Other Resource Prices