For a cost-push inflation to occur, oil price increases must be accompanied by
A) decreased investment spending.
B) lower personal tax rates.
C) increases in the quantity of money.
D) increases in government expenditures.

Question

Quizplus · Accepted Answer

Cost-push inflation occurs when the overall price levels rise due to increases in the cost of wages and raw materials. An increase in the quantity of money can exacerbate inflationary pressures by increasing demand, thus supporting the inflationary trend initiated by rising oil prices.

For a Cost-Push Inflation to Occur, Oil Price Increases Must