Question
Which of the following will likely lead to cost-push inflation? Select the two correct answers.(1 point)
a. Exports increase dramatically after a relative drop in price.
b. Consumers become more comfortable with debt, increasing their spending as they take on more loans.
c. An ongoing war causes government spending to nearly double in quantity.
d. An increase in the price of oil has reduced supply of all goods and services that use oil as an input.
e. A tornado destroys factories and lowers supply levels throughout the economy.
a. Exports increase dramatically after a relative drop in price.
b. Consumers become more comfortable with debt, increasing their spending as they take on more loans.
c. An ongoing war causes government spending to nearly double in quantity.
d. An increase in the price of oil has reduced supply of all goods and services that use oil as an input.
e. A tornado destroys factories and lowers supply levels throughout the economy.
Answers
GPT-4o mini
The two options that will likely lead to cost-push inflation are:
**d. An increase in the price of oil has reduced supply of all goods and services that use oil as an input.**
**e. A tornado destroys factories and lowers supply levels throughout the economy.**
Cost-push inflation occurs when the overall price levels rise due to increases in the cost of production. In both of these scenarios, the increase in the cost of inputs (oil and factory destruction) leads to a reduction in supply, which pushes prices up.
**d. An increase in the price of oil has reduced supply of all goods and services that use oil as an input.**
**e. A tornado destroys factories and lowers supply levels throughout the economy.**
Cost-push inflation occurs when the overall price levels rise due to increases in the cost of production. In both of these scenarios, the increase in the cost of inputs (oil and factory destruction) leads to a reduction in supply, which pushes prices up.