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

Question

Quizplus · Accepted Answer

When cost-push inflation starts, it is caused by a decrease in aggregate supply due to an increase in production costs. This leads to a decrease in real GDP as firms produce less, and a rise in the price level due to decreased supply and increased production costs.

When Cost-Push Inflation Starts,real GDP ________ and the Price Level