Which inflation type is characterized by production costs causing an increase in prices?

Which inflation type is characterized by production costs causing an increase in prices?

• A. Demand-pull inflation
• B. Cost-push inflation
• C. Price level inflation
• D. Stagflation

Answer: (B)

Cost-push inflation is characterized by increases in production costs leading to higher prices for goods and services. When the cost of inputs such as raw materials or labor rises, producers may pass these costs onto consumers in the form of higher prices. This type of inflation can be triggered by various factors, including rising wages, increased prices of raw materials, or supply chain disruptions. In contrast, demand-pull inflation occurs when the demand for goods and services exceeds supply, leading to higher prices. Price level inflation is a broader term that describes the general increase in prices across the economy, while stagflation refers to a situation where stagnant economic growth coincides with high inflation and unemployment. Thus, cost-push inflation specifically addresses the influence of increased production costs on pricing, which makes it the correct choice in this context.

Cost-push inflation is characterized by increases in production costs leading to higher prices for goods and services. When the cost of inputs such as raw materials or labor rises, producers may pass these costs onto consumers in the form of higher prices. This type of inflation can be triggered by various factors, including rising wages, increased prices of raw materials, or supply chain disruptions.

In contrast, demand-pull inflation occurs when the demand for goods and services exceeds supply, leading to higher prices. Price level inflation is a broader term that describes the general increase in prices across the economy, while stagflation refers to a situation where stagnant economic growth coincides with high inflation and unemployment. Thus, cost-push inflation specifically addresses the influence of increased production costs on pricing, which makes it the correct choice in this context.