10. Which of the following statements is true? a Cost-push inflation occurs as prices rise because of a rise in per-unit cost of production (unit cost = total cost/units of output). With cost-push inflation, prices rise but output falls. b Rising costs reduce profits and the amount of output firms are willing to supply at the current price level. As a result, the economy’s production of goods and services declines and the price level rises. c Supply shocks have been the major source of cost-push inflation. Supply shocks occur when there are dramatic increases in the price of raw materials or energy. d All of the above. e Only a) and b)

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