Question

Which of the following will likely lead to cost-push inflation? Select the two correct answers.(1 point)
Responses

Consumers become more comfortable with debt, increasing their spending as they take on more loans.
Consumers become more comfortable with debt, increasing their spending as they take on more loans.

A tornado destroys factories and lowers supply levels throughout the economy.
A tornado destroys factories and lowers supply levels throughout the economy.

Exports increase dramatically after a relative drop in price.
Exports increase dramatically after a relative drop in price.

An ongoing war causes government spending to nearly double in quantity.
An ongoing war causes government spending to nearly double in quantity.

An increase in the price of oil has reduced supply of all goods and services that use oil as an input.

Answer 1

The two correct answers that are likely to lead to cost-push inflation are:

1. **A tornado destroys factories and lowers supply levels throughout the economy.**
2. **An increase in the price of oil has reduced supply of all goods and services that use oil as an input.**

Cost-push inflation occurs when the overall price levels rise due to increases in the cost of production and decrease in the supply of goods. Both the destruction of factories and the rise in oil prices can lead to increased production costs for many goods, resulting in cost-push inflation.