When Does Cost Push In?ation Occur in an Economy

question 18

Multiple Choice

When does cost push in?ation occur in an economy?

• A) When a fall in aggregate demand leads to an increase in overall prices.
• B) When a rise in aggregate supply leads to an increase in overall prices.
• C) When a rise in aggregate demand leads to an increase in overall prices.
• D) When a fall in aggregate supply leads to an increase in overall prices.

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Definitions:

Inflation

The rate at which the general level of prices for goods and services is rising, eroding purchasing power.

Benefit

An advantage or profit gained from something.

Foregone Benefit

The lost potential gain from other alternatives when one alternative is chosen.

Alternative Cost

Also known as opportunity cost, it represents the benefit that is missed or given up when choosing one alternative over another.