Which of the following is true of cost-push inflation?
A)Cost-push inflation is associated with an economic expansion.
B)Cost-push inflation is rarely experienced in developed economies.
C)Cost-push inflation is caused by a decrease in aggregate supply.
D)Cost-push inflation is identical to demand-pull inflation.
E)Cost-push inflation is the result of increased consumer spending.

Question

Quizplus · Accepted Answer

Cost-push inflation occurs when there is a decrease in aggregate supply due to factors such as an increase in wages, energy costs or raw material costs. This increases the production costs for businesses, which in turn leads to an increase in the price of goods and services, causing inflation. Cost-push inflation is not associated with economic expansion and is not identical to demand-pull inflation. While it may be experienced less frequently in developed economies, it is still a real phenomenon. Increased consumer spending is associated with demand-pull inflation, not cost-push inflation.

Which of the Following Is True of Cost-Push Inflation