Economics • Economic BasicsMedium
Which of the following describes cost-push inflation within an economy?
A. Excess aggregate demand chasing a limited supply of goods and services
B. An increase in the general price level driven by rising costs of wages and raw materials✓ Correct Answer
C. A sudden decrease in consumer spending leading to widespread inventory accumulation
D. An expansionary monetary policy increasing the total money supply beyond optimal levels
💡 Solution & Explanation
Cost-push inflation occurs when overall prices increase because producers face higher expenses for essential inputs like labor, energy, and raw materials, forcing them to pass those costs onto consumers. Demand-pull inflation arises when total spending in the economy outpaces aggregate production capacity. Expansionary monetary policy typically fuels demand-pull pressures rather than direct cost-push shocks. Inventory accumulation resulting from low consumer spending generally causes deflationary pressure or economic stagnation.
More Economics Economic Basics questions
- In the context of macroeconomic stabilization policies, what does the 'Crowding Out Effect' describe?
- What does a negative economic growth rate for two consecutive quarters officially signify in macroeconomic…
- Which of the following describes 'Moral Hazard' in principal-agent relationships?
- What does the 'Kinked Demand Curve' model help explain in industrial economics?
- Which type of unemployment occurs when individuals are temporarily between jobs, transitioning from one…