Exhibit 7-1
-In Exhibit 7-1 the economy is initially facing AD₀and AS₀.Which of the following best describes the occurance of cost-push inflation?

Question

Exhibit 7-1 -In Exhibit 7-1 the economy is initially facing AD₀and AS₀.Which of the following best describes the occurance of cost-push inflation?

Quizplus · Accepted Answer

Cost-push inflation is caused by a decrease in aggregate supply, which results in higher prices and lower output. This is reflected in the shift of the aggregate supply curve to the left, which is depicted in answer B. The aggregate demand curve does not shift in response to cost-push inflation, as it is caused by supply-side factors rather than demand-side factors. Therefore, choices A, C, D, and E are incorrect.

Exhibit 7-1 -In Exhibit 7-1 the Economy Is Initially Facing AD0 and

Exhibit 7-1 -In Exhibit 7-1 the Economy Is Initially Facing AD₀and