25. Which of the following statements is correct? A. Cost push inflation occurs

Question

25. Which of the following statements is correct? A. Cost push inflation occurs when producers face ever higher increases in their costs resulting in a decrease in Supply that pushes prices down. B. The solution for cost push inflation involves Policies that have the effect of increasing supply. C. Cost push inflationary pressures can be reduced through a reduction in regulation, lower corporate income taxes, higher employment related taxes and liberalizing depreciation laws. D. All of the above statements are correct. E. None of the above statements is correct.

Explanation / Answer

The correct option is (D). All of the above statements are correct.

Cost push inflation is inflation caused by increase in the prices of inputs such as labor, raw material, etc. as a result; there will be a decrease in the supply of these goods.

Though the demand remains constant, the prices of commodities increase. This results in an increase in the overall price level. This is in essence cost push inflation. This is inflation triggered from supply side i.e. because of less supply.

Related Questions

Navigate

• Browse (All)
• Browse 2
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.