Question

Cost-push inflation occurs when__________ decreases until equilibrium output falls below the employment level.

As a result, the__________increases.

one possible cause of cost-push inflation is an increase in __________.

To combat falling aggregate output, the government may introduce policies to increase in __________to where it and short-run aggregate supply intersect __________ at the same point. These policies came __________to return to its full employment level, and the __________ increases even further.

WORD BANK

-Cost of inputs -short-run aggregate supply

-imports -long-run aggregate supply

-cost-push inflation -aggregate demand

-aggregate output -aggregate price level

Answer 1

Cost-push inflation occurs when cost of inputs increases due to which short run aggregate supply decreases until equilibrium output falls below the employment level.

As a result aggregate price level increases.

one possible cause of cost-push inflation is an increase in cost of inputs

To combat falling aggregate output, the government may introduce policies to increase in aggregate demand to where it and short-run aggregate supply intersect long run aggregate supply at the same point. These policies cause aggregate output to return to its full employment level, and the aggregate price level increases even further