Which of the following factors could cause the economy to experience supply-side inflation? A. Increased security about jobs and future income. B. The development of new technology to increase productivity. C. Government laws which say that the average work week must be reduced by one hour every year. D. Increases in the number of immigrants allowed into the country.

Question

Business

Dennis Chung

27 July, 23:51

Which of the following factors could cause the economy to experience supply-side inflation? A. Increased security about jobs and future income. B. The development of new technology to increase productivity. C. Government laws which say that the average work week must be reduced by one hour every year. D. Increases in the number of immigrants allowed into the country.

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Answers (1)

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Pierre Chapman · Answer 1

C. Government laws which say that the average work week must be reduced by one hour every year.

Explanation:

Supply side inflation or cost push inflation occurs when an input into the production process increases in value due to scarcity. It occurs when there is higher cost of production, resulting in decreased aggregate supply.

A reduction in the hours of service provided by labour will lead to scarcity, this will cause an increase in the price of labour. Since labour is a major input in production, increased cost of labour will reduce aggregate supply. This is supply side inflation.