What impact does cost-push inflation have on the price level and real output?
A)It decreases the price level and decreases real output.
B)It increases the price level and decreases real output.
C)It decreases the price level and increases real output.
D)It increases the price level and increases real output.

Question

Quizplus · Accepted Answer

Cost-push inflation occurs when the cost of production increases, leading to an increase in the price level. This leads to a decrease in real output as consumers face higher prices and thus demand less. Therefore, the correct choice is B, which states that cost-push inflation increases the price level and decreases real output.

What Impact Does Cost-Push Inflation Have on the Price Level