Answer to Question #218361 in Economics for Andie

Question

4.1     Which of the following best describes a difference between demand-pull inflation and cost- push inflation?

 

[1] Demand-pull inflation occurs when there is shortage in aggregate supply, while cost- push inflation is the upward pressure on general price level due to rising cost of production.

[2] Demand-pull inflation is triggered by increases in the cost of production, while cost- push inflation is occurring when the aggregate demand for goods and services increases while aggregate supply remains unchanged.

[3] Demand-pull inflation can be caused by increases in the cost of wages and intermediate goods, while cost-push can be caused by increased exports.

[4] There is no difference between demand-pull inflation and cost-push inflation as they are triggered by the same sources.

Answer 1

[2] Demand-pull inflation is triggered by increases in the cost of production, while cost- push inflation is occurring when the aggregate demand for goods and services increases while aggregate supply remains unchanged