Supply-side inflation
A) is caused by rapidly increasing labor productivity.
B) results from an increase in aggregate demand.
C) leads to falling price levels.
D) is a manifestation of the wage-price spiral.
E) can occur only at full-employment levels of real GDP.

Question

Quizplus · Accepted Answer

Supply-side inflation, also known as cost-push inflation, occurs when an increase in production costs, such as wages or raw material prices, leads to an increase in the prices of goods and services. The wage-price spiral refers to the process where rising wages lead to higher prices, which in turn lead to even higher wages. Therefore, option D is the correct answer.

Supply-Side Inflation