When does cost-push inflation occur?
A)when the aggregate demand curve shifts rightward and aggregate supply is fixed
B)when the short-run aggregate supply curve shifts leftward while aggregate demand is fixed
C)when the short-run aggregate supply curve shifts rightward
D)when the aggregate demand curve shifts leftward at a faster rate than short-run aggregate supply

Question

Quizplus · Accepted Answer

Cost-push inflation occurs when the short-run aggregate supply curve shifts leftward while aggregate demand is fixed. This happens when the cost of producing goods and services increases, leading to a decrease in the supply of goods and services. As a result, the price level increases causing inflation.

When Does Cost-Push Inflation Occur