Which of the following factors would be most likely to lead to cost-push inflation?

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BlackTom AI · Accepted Answer

The question asks which factor would most likely lead to cost-push inflation. Cost-push inflation occurs when overall prices rise due to increases in production costs, which then get passed on to consumers as higher prices.
Option c is: 'An increase in the global oil price.' Oil is a fundamental input in many industries (fuel, energy, transportation, and various petrochemical products). A rise in oil prices raises costs across production and shipping, leading firms to raise prices to maintain profit margins, which is the classic mechanism of cost-push inflation.
If production costs rise (for example, through higher energy costs, wages, or raw material prices), firms face tighter margins unless they raise prices. This aligns with the standard channel of cost-push inflation: higher input costs → higher production costs → higher final prices for consumers.
Regarding the missing options: the provided data does not list alternative choices to compare against. Normally, options describing demand-side factors (like an increase in consumer spending or rising aggregate demand) would point to demand-pull inflation rather than cost-push inflation. Without the full set of options, I can’t evaluate each against cost-push criteria, but the identified factor—higher oil prices—fits the cost-push mechanism well.
In summary, an increase in the global oil price directly raises production and transportation costs across multiple sectors, making it a textbook driver of cost-push inflation.

MUF0062 Economics Unit 2 - Semester 1, 2025 Revision Quiz - Inflation (10 - 15 minutes)

Which of the following factors would be most likely to lead to cost-push inflation?

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