When cost-push inflation starts,real GDP ________ and the price level ________.
A)decreases;falls
B)does not change;falls
C)decreases;rises
D)does not change;does not change
E)increases;falls

Question

Quizplus · Accepted Answer

Cost-push inflation results from an increase in production costs, which causes a decrease in the quantity of output supplied. As a result, real GDP decreases. At the same time, prices rise because producers need to charge higher prices to cover their increased costs. Therefore, the price level increases.

When Cost-Push Inflation Starts,real GDP ________ and the Price Level