Question

Cost-push inflation occurs when:

a) subsidies to businesses rise.

b) a supply shock shifts the short-run aggregate supply curve to the right.

c) total spending expands so much that equilibrium output exceeds full-employment output.

d) rising resource costs reduce short-run aggregate supply.

Answer 1

Short answer D
Labor costs could cause that type of inflation as well.

C is eliminated because Push Cost Inflation is cost increase in what it takes to make a product.

B is gone because it is really deflation not inflation. This answer implies a drop in price. Inflation is an increase in price.

A subsides are an increase in capital. That will lower the price or keep it stable. Not A