What Are the Primary Effects of Cost-Push Inflation

question 39

Multiple Choice

What are the primary effects of cost-push inflation?

• A) It raises real output and redistributes an increased level of real income.
• B) It reduces real output and redistributes a decreased level of real income.
• C) It raises real output but redistributes a decreased level of real income.
• D) It reduces real output but redistributes an increased level of real income.

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Definitions:

Exchange Rate

A financial metric used to determine how much one currency is worth in terms of another for trade and financial transactions.

Unbiased Forward Rates

Future rates of interest inferred from current bond prices, assuming no arbitrage opportunities.

Forward Rate

An agreed-upon price for a financial transaction that will occur at a future date, used in derivatives markets.

Exchange Rate

The worth of one currency in relation to another for converting between them, showing the amount one currency is equivalent to in another currency.