PRC-3 · Chapter 18 · Question 2 of 33
A massive global oil crisis doubles the cost of transportation fuel. Consequently, manufacturers pass these massive new freight costs onto consumers by raising the prices of all goods. What type of inflation is this?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Cost-push inflation
Explanation
Cost-push inflation is driven by a decrease in aggregate supply due to an increase in the costs of production (like raw materials or wages), pushing prices up.
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