Which type of inflation is caused by an increase in fuel
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Answer:
Demand-pull inflation occurs when aggregate demand for goods and services in an economy rises more rapidly than an economy's productive capacity.
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‘Cost-push inflation’ is caused by an ‘increase in fuel’. The rise in fuel prices leads to a decrease in the aggregate supply of ‘goods and services’.
Explanation:
- The rising fuel prices lead to inflation. The rise in oil prices directly affects the total consumer price index.
- This happens because the rise in oil prices leads to an increase in the energy cost component that includes the price of electricity, gas, household fuels, and many other related energy items.
Learn more about Cost-push inflation
What is the factor of cost push inflation
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Comparison chart of demand pull inflation and cost push inflation.
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