Cost-push inflation starts with
A)an increase in potential GDP.
B)a decrease in aggregate supply.
C)an increase in aggregate supply.
D)an increase in aggregate demand.
E)a decrease in aggregate demand.

Question

Quizplus · Accepted Answer

Cost-push inflation occurs when there is a decrease in aggregate supply due to an increase in the cost of production factors such as labor, raw materials, or energy. This leads to higher prices for goods and services, even if there is no increase in aggregate demand. Therefore, option B is the correct answer.

Cost-Push Inflation Starts with