ECONOMICS
INFLATION
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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increase in the wage level
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increase in prices abroad (imports become costly)
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government regulations
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None of the above
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Detailed explanation-1: -Cost-push inflation can occur when higher costs of production decrease the aggregate supply (the amount of total production) in the economy. Since the demand for goods hasn’t changed, the price increases from production are passed onto consumers creating cost-push inflation.
Detailed explanation-2: -Cost-push inflation happens when there is a decline in the supply of goods and services and demand remains unchanged or even grows, driving prices and inflation higher.
Detailed explanation-3: -Keynes believed that the health of a country’s economy depending on a mix of government and private controls. Under his economic model, cost-push inflation occurs whenever the cost of production suddenly rises but the demand for the product or service remains the same.
Detailed explanation-4: -Answer and Explanation: Reason: Inflation can be caused due to excessive aggregate expenditure. This type of inflation is called as demand pull inflation. It can also be caused due to increase in input costs of production, in which case it is called as cost push inflation.