Pretest

Question 3 • CMS 2026-2027 Economics and Personal Finance CREDIT RECOVERY

Which scenario is an example of cost-push inflation?

Answer

An increase in workers’ wages raises the production cost of cars, and car prices rise as a result.

The demand for cars falls as consumers have less disposable income, and car prices fall as a result.

A government bailout helps car manufacturers lower their costs, and car prices fall as a result.

Consumers have more money to buy cars, and the prices of cars and car parts rise 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.

More from this Course

Pretest

Pretest

Pretest