Question

14)

Cost-push inflation occurs when there is ________________. a trade deficit excess demand for goods and services excess inventory rising per-unit production costs

Answer 1

Rising per unit production costs.

( As the name suggests, cost push inflation occurs as a result of decrease in aggregate supply due to rising production costs. The source of cost push inflation is not always a dramatic event like an OPEC price rise. A sharp increase in costs to business can be a potential source of cost inflation.This means that upward pressure on the prices can be caused by cost increases for labor, Raw materials, construction, equipment, borrowing and so on.

* Inventory accumulation and excess demand for goods and services are causes of demand pull Inflation.)