If the price level should increase in the near term due to decreases in the short-run aggregate supply, the result would be
A) demand-pull inflation.
B) demand-pull recession.
C) cost-push inflation.
D) cost-pull expansion.

Question

Quizplus · Accepted Answer

A decrease in short-run aggregate supply would result in a decrease in output and an increase in prices. This is known as cost-push inflation, as the increase in prices is due to increased costs passed on to consumers, rather than increased demand.

If the Price Level Should Increase in the near Term