Question:
Which of the following would generate a cost-push inflation?
(1) An increase in the price of labour
(2) A decrease in the price of electricity
(3) An increase in household consumption
(4) A decrease in government purchases
(5) An increase in the money supply
Correct Answer:
(1)
Answer Explanation:
Cost-push inflation is driven by supply-side shocks that make production more expensive, shifting the aggregate supply curve to the left. An increase in the price of labor (wages) increases production costs for businesses across the economy, forcing them to raise their product prices.
Topic: Inflation Year: 2018
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