What type of inflation is most likely to happen when the cost of raw materials like oil or wheat suddenly increases?
A. Demand-pull inflation
B. Hyperinflation
C. Asset inflation
D. Cost-push inflation
Answer (1)
The correct answer is letter D. Cost-push inflationCost-push inflation occurs when the costs of production go up—like wages, electricity, fuel, or raw materials—and businesses pass these increased costs on to consumers in the form of higher prices.For example, if the price of imported crude oil rises sharply, the cost of electricity and transportation in the Philippines also increases. Jeepney fares may go up, and delivery costs for products increase. Businesses, in turn, raise prices, which causes cost-push inflation.
