Which scenario best describes cost-push inflation?
A. People are spending more due to a rise in wages.
B. A new tax reduces consumer spending.
C. Prices rise because fuel and raw materials become more expensive.
D. Interest rates are lowered to encourage more spending.
Answer (1)
The answer is C. Cost-push inflation happens when the cost of production increases, like fuel, electricity, or wages. Businesses pass these costs on to consumers by raising prices. A real-life example is the oil price hike in 2022, which made food and transportation more expensive in the Philippines. Jeepney fares rose, and food prices increased due to higher delivery costs. Even if demand stayed the same, prices went up because producing goods became more costly.
