Which type of inflation is most likely to result from a sudden increase in global oil prices?
A. Demand-pull inflation
B. Asset inflation
C. Cost-push inflation
D. Disinflation
Answer (2)
The correct answer is letter C. Cost-push inflationWhen global oil prices rise, the cost of transporting goods, running factories, and producing food all go up. Businesses are forced to raise their prices to avoid losing money. This is cost-push inflation, because the rising cost of production “pushes” prices up.A local example. In 2022, rising international oil prices affected jeepney fares, delivery charges, and even electricity bills in the Philippines. Fishermen needed more fuel, which raised the cost of seafood. Vegetable delivery from Benguet to Manila also became more expensive.All of this made daily life more expensive for regular Filipinos, even if they weren’t buying more. It shows how one key resource—oil—can create ripple effects that lead to nationwide price hikes.
The correct answer is C. Cost-push inflation.A sudden increase in global oil prices raises the cost of production for many goods and services because oil is a key input (for energy, transport, manufacturing). When production costs rise, businesses often pass these higher costs onto consumers in the form of higher prices, leading to inflation. This type of inflation caused by rising costs of production is called cost-push inflation.Demand-pull inflation happens when overall demand in the economy exceeds supply, pushing prices up.Asset inflation refers to rising prices of assets like stocks or real estate.Disinflation means a slowdown in the rate of inflation, not an increase.
