Question

Which is a possible cause of cost-push inflation?
A. an increase in bank lending
B. an increase in the price of currency
C. a reduction in income tax
D. an increase in government spending

Answer 1

Answer:

B. An increase in the price of currency

Explanation:

In the case of imports, if the price of foreign currency goes up, more local currency would be needed to purchase foreign currency.

This would lead to the price of imports going up, and this would be passed to the consumer. Prices rise (inflation) as a result of the rise in cost (foreign currency)