ECONOMICS
INFLATION
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
A an increase in firms’ profit margins
|
|
|
B an increase in raw material prices
|
|
|
C an increase in the supply of money
|
|
|
D an increase in trade union power
|
Detailed explanation-1: -Although not all natural disasters result in higher production costs and therefore, wouldn’t lead to cost-push inflation. Other events might qualify if they lead to higher production costs, such as a sudden change in government that affects the country’s ability to maintain its previous output.
Detailed explanation-2: -Cost-push inflation occurs when the supply of a good or service changes, but the demand for it stays the same. It occurs most often when a monopoly exists, wages increase, natural disasters occur, regulations are introduced, or exchange rates change. Cost-push inflation is rare.
Detailed explanation-3: -According to Quantity Theory: Inflation is caused when the rate of increase in the money supply is faster for example printing more notes than the growth of real output. Because there is more money pursuing the same quantity of commodities, this is the case.
Detailed explanation-4: -Deficit financing. Increase in administrating prices. Increase in interest rates. Increase in population. Increase in oil prices. Mounting public expenditure.