Asked by Landon Busse on Jun 30, 2024
Verified
Which of the following scenarios can cause cost-push inflation?
A) An increase in net taxes
B) A major union wage settlement that increases average wage levels
C) A decrease in real interest rates
D) An increase in government purchases
E) An oil price shock that reduces oil prices
Cost-push Inflation
A type of inflation caused by an increase in the cost of production inputs, leading to a decrease in aggregate supply in the economy.
Union Wage
A wage rate that has been negotiated by a labor union on behalf of its members, often higher than the market rate for non-unionized workers.
Oil Price
The cost per barrel of crude oil, influenced by global supply and demand dynamics, geopolitical events, and market speculation.
- Understand cost-push and demand-pull inflation, including specific examples that can cause these types of inflation.
Verified Answer
ZK
Zybrea KnightJul 04, 2024
Final Answer :
B
Explanation :
A major union wage settlement that increases average wage levels can cause cost-push inflation by increasing the cost of production for firms, which may lead to higher prices for consumers.
Note: None of the other options listed can cause cost-push inflation. An increase in net taxes, a decrease in real interest rates, and an increase in government purchases could potentially lead to demand-pull inflation, but not cost-push inflation. An oil price shock that reduces oil prices could actually lead to deflation rather than inflation.
Note: None of the other options listed can cause cost-push inflation. An increase in net taxes, a decrease in real interest rates, and an increase in government purchases could potentially lead to demand-pull inflation, but not cost-push inflation. An oil price shock that reduces oil prices could actually lead to deflation rather than inflation.
Learning Objectives
- Understand cost-push and demand-pull inflation, including specific examples that can cause these types of inflation.