ECONOMICS
INFLATION
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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An inward shift of SRAS
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An outward shift of SRAS
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An inward shift of AD
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An outward shift of AD
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Detailed explanation-1: -An increase in the price level due to an increase in production costs e.g. taxes, wages, utility or component prices. The cost increase will cause a negative shift in the SRAS curve. This causes prices to rise as costs push the supply curve up the aggregate demand curve.
Detailed explanation-2: -In the case of cost-push inflation, if there is an increase in the cost of production of commodities due to a rise in the average and marginal costs of production, it causes the supply curve of a commodity to shift to the left.
Detailed explanation-3: -Cost-push inflation (also known as wage-push inflation) occurs when overall prices increase (inflation) due to increases in the cost of wages and raw materials. Higher costs of production can decrease the aggregate supply (the amount of total production) in the economy.