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

Question

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.

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

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

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

Exports increase dramatically after a relative drop in price.

Answer 1

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

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

Cost-push inflation occurs when the overall prices of goods and services rise due to increases in production costs, such as raw materials and wages, which can be exacerbated by supply shocks.