Which of the following would be the most likely cause of cost-push inflation? a. a reduction in raw material prices b. more aggressive wage bargaining by labour unions c. a decline in the number of workers belonging to labour unions d. more rapid increases in labour productivity

Which of the following would be the most likely cause of cost-push inflation?
a. a reduction in raw material prices
b. more aggressive wage bargaining by labour unions
c. a decline in the number of workers belonging to labour unions
d. more rapid increases in labour productivity

Answer

• more aggressive wage bargaining by labour unions
  Explanation:
  Cost-push inflation occurs when overall prices goes up as a result of increase in wages cost and raw materials. When cost of production increases, it becomes expensive to produce goods and services. To compensate for the high cost of production, the suppliers raise the prices of goods much high that it becomes too expensive for some consumers. A more aggressive bargaining labor union is most likely to cause an increase in minimum wages, which raises the cost of labor and hence cost of production causes prices to go up.