GENERAL KNOWLEDGE

GK

BUSINESS ECONOMICS

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
The price of silicon used to make computer chips increases is what type of inflation?
A
cost-push inflation
B
demand-pull inflation
C
Either A or B
D
None of the above
Explanation: 

Detailed explanation-1: -Cost-push inflation occurs when the aggregate supply of goods and services decreases because of an increase in production costs. For instance, if low-paid workers in a factory form a union and demand higher wages, it’s possible the factory owner will simply shut down the business in response.

Detailed explanation-2: -Cost-push inflation occurs when overall prices increase (inflation) due to increases in the cost of wages and raw materials. Cost-push inflation can occur when higher costs of production decrease the aggregate supply (the amount of total production) in the economy.

Detailed explanation-3: -It is an increase in the tax rates which will cause cost push inflation.

Detailed explanation-4: -Demand pull inflation arises when the aggregate demand becomes more than the aggregate supply in the economy. Cost pull inflation occurs when aggregate demand remains the same but there is a decline in aggregate supply due to external factors that cause rise in price levels.

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