[Solved] Which of the following statements about cost-push inflation is correct? — Ans: It can be caused by supply shocks such as a sudden increase in oil prices | Economic Awareness

Economic Awareness - Sectors of Indian Economy

Which of the following statements about cost-push inflation is correct?

AIt can be caused by supply shocks such as a sudden increase in oil prices

BIt results from an increase in aggregate demand exceeding aggregate supply

CIt is always accompanied by high economic growth

DIt is controlled effectively by increasing money supply

Step-by-Step Solution

Step 1: Understand cost-push inflation
Cost-push inflation arises from increased production costs or supply shocks pushing prices up.
Step 2: Analyze options
Increase in aggregate demand causes demand-pull inflation, not cost-push. Cost-push inflation often occurs with low or stagnant growth, not high growth. Increasing money supply worsens inflation, not controls it.
Step 3: Eliminate incorrect options
Options about aggregate demand, high growth, and increasing money supply are incorrect for cost-push inflation.
Final Answer:
It can be caused by supply shocks such as a sudden increase in oil prices → Option A
Quick Check:
Cost-push inflation = supply shocks like oil price rise ✅

Quick Trick: Oil price shocks are classic cost-push inflation causes.

Common Mistakes:

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