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

First, note that the provided data includes the correct answer as: c. An increase in the global oil price. However, the list of answer options is missing in the provided payload, so I cannot evaluate each option individually or compare them.

What cost-push inflation entails: it occurs when overall price levels rise due to higher production costs, not because of increased demand. A key driver is rising costs of essential inputs like energy and raw materials. When global oil prices rise, the cost of transportation, heating, and production for many goods increases. Firms facing higher input costs often pass these costs on to consumers in the form of higher prices, contributing to inflation.

Why the stated option (increase in global oil price) is consistent with cost-push inflation:
- Oil is a fundamental input for many sectors: transportation, manufacturing, and logistics. Higher oil prices raise marginal costs across the supply chain.
- Increased production costs tend to reduce supply at existing prices, shifting the short-run aggregate supply curve leftward and raising the price level.
- Even if demand remains constant, higher input costs can translate into higher consumer prices, which is the essence of cost-push inflation.

Why other hypothetical options (if they were present) might be incorrect in typical cost-push vs demand-pull contexts:
- An uptick in consumer demand without a corresponding rise in costs would more likely cause demand-pull inflation, as higher demand drives up prices.
- A one-time fiscal stimulus that boosts spending could shift aggregate demand upward, also suggesting demand-pull pressures rather than pure cost-push effects.
- A productivity breakthrough reducing costs would typically lower prices or counter inflation, not push it upward.

Since the actual option list is missing, the explicit evaluation of each choice cannot be completed here. If you can provide the full set of answer options, I can walk through each one in detail and explain why the selected option best fits cost-push inflation.

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

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