2
QuizMultiple Choice

Inflation and Stagflation — Quiz

Question 2 • Personal Finance and Economics

Which scenario is an example of cost-push inflation?

Answer
A
Consumers have more money to buy cars, and the prices of cars and car parts rise as a result.
B
The demand for cars falls as consumers have less disposable income, and car prices fall as a result.
C
An increase in workers’ wages raises the production cost of cars, and car prices rise as a result.
D
A government bailout helps car manufacturers lower their costs, and car prices fall as a result.

Explanation

Cost-push inflation occurs when rising production costs lead businesses to raise prices. In choice B, higher wages increase the cost of producing cars, and manufacturers respond by raising car prices. Choice A describes demand-pull inflation, where stronger consumer demand pushes prices up.

AI-written and checked against the verified answer.

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