ECONOMICS
INFLATION
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A an increase in the exchange rate
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B an increase in the money supply
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C an increase in the prices of imports
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D an increase in the rate of income tax
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Detailed explanation-1: -The most common cause of cost-push inflation starts with an increase in the cost of production, which may be expected or unexpected. For example, the cost of raw materials or inventory used in production might increase, leading to higher costs.
Detailed explanation-2: -Cost-push inflation A fall in aggregate supply is often caused by an increase in the cost of production. If aggregate supply falls but aggregate demand remains unchanged, there is upward pressure on prices and inflation – that is, inflation is ‘pushed’ higher.
Detailed explanation-3: -Examples of Cost-Push Inflation Electric power suppliers need high levels of natural gas to create electricity. When global policies, war, or natural disasters drastically reduce the oil supply, gasoline prices rise because demand remains relatively stable even as supply shrinks.
Detailed explanation-4: -Deficit financing. Increase in administrating prices. Increase in interest rates. Increase in population. Increase in oil prices. Mounting public expenditure.