Cost Pull Inflation Occurs When The

question 21

Multiple Choice

Cost pull inflation occurs when the:

• A) price of a key input increases suddenly.
• B) price level changes in response to changes in the business cycle.
• C) price of necessity goods increases suddenly.
• D) business cycle becomes sporadic and unpredictable.

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Definitions:

Cost of Retained Earnings

This represents the opportunity cost for a company of using its retained earnings for investment purposes rather than distributing them as dividends.

Common Stock

A type of equity security that represents ownership in a corporation, giving holders voting rights and the potential for dividends.

Market Yield

The current rate of return anticipated on a bond if held until maturity, expressed as an annual percentage.

Component Cost

The cost related to each source of capital, such as debt and equity, that a company uses for funding.