Chapter 33, Problem 6MCQ

To determine

The correct option for an increase in the price level resulting from an increase in energy prices.

Answer to Problem 6MCQ

From the available options, the correct option is cost-push inflation.

Explanation of Solution

When aggregate supply decreases or remains the same but aggregate demand would increase then this type of inflation is demand-pull inflation. Re-inflation refers to the event or instance that causes inflation in the economy again and input inflation is an imbalance between supply and demand due to factors of production such as labor, etc. Hyperinflation is a rapid and very large increase in the prices of goods and services in the economy.

And, cost-push inflation is a situation of inflation when the level of price increases due to an increase in energy prices such as an increase in the cost of wages or raw materials.

Therefore, the correct option is a (cost-push inflation) and all other options are incorrect.

Economics Concept Introduction

Introduction: Price level is the average current price of goods and services in the economy that are produced in a particular interval.