Which of the Following Would Lead to Wage-Push Inflation

question 5

Multiple Choice

Which of the following would lead to wage-push inflation?

• A)The economy experiences a trend of wage increases below labour productivity increases.
• B)The economy experiences an inflationary gap.
• C)Producers are able to pass a wage increase on to the consumer in the form of higher prices.
• D)Aggregate demand increases significantly.

---

Definitions:

Constant Returns to Scale

A situation in which increasing the amount of all inputs used in production by a certain factor results in output increasing by the same factor.

Economies of Scale

Cost advantages that enterprises obtain due to their size, output, or scale of operation, with cost per unit of output generally decreasing with increasing scale.

Diseconomies of Scale

A condition when a company or business grows so large that the costs per unit increase, leading to reduced efficiency.

Constant Returns to Scale

A situation in production where an increase in the quantity of inputs leads to a proportional increase in the quantity of output.