Cost-push inflation can be shown on an aggregate supply aggregate demand diagram as
A) a rightward shift of the aggregate supply curve with no change in aggregate demand.
B) a rightward shift in the aggregate demand curve with no change in aggregate supply.
C) a leftward shift in the aggregate demand curve with no change in aggregate supply.
D) a leftward shift in the aggregate supply curve with no change in aggregate demand.

Question

Quizplus · Accepted Answer

Cost-push inflation is caused by an increase in production costs, such as wages or raw materials, that leads to a decrease in aggregate supply. As a result, the aggregate supply curve shifts leftward with no change in aggregate demand. Therefore, the correct answer is D, a leftward shift in the aggregate supply curve with no change in aggregate demand.

Cost-Push Inflation Can Be Shown on an Aggregate Supply Aggregate