- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 11. Understanding Business Cycles
- Subject 7. Inflation
CFA Practice Question
Cost-push inflation means prices are pushed up by ______.
II. appreciations of home currency
III. increases in raw material prices
IV. increases in investment demand
IV. increases in household demand
I. increases in wages
II. appreciations of home currency
III. increases in raw material prices
IV. increases in investment demand
IV. increases in household demand
Correct Answer: I and III
User Contributed Comments 7
| User | Comment |
|---|---|
| leo6fin | doesnt this also include increase in household demand? |
| cahiz84 | Increase in household demand will cause demand push inflation. |
| weehongw | but isn't that price level increase (due to higher cost) AND increase in AD cause the cost-push inflation? |
| Korny | That's called demand-pull inflation |
| johntan1979 | DEPRECIATION in domestic currency --> demand-pull inflation |
| Shaan23 | Johntan..you are correct but remember AS is also affected by exchange rate. If it was a depreciation of home currency it would cause cost-pull as well and the SRAS would shift left. |
| shann680 | can someone explain how appreciating/depreciating currencies affect demand pull and cost push inflation? i was under the impression that depreciating currencies made the inputs of raw materials more expensive. how does this translate into demand-pull inflation? would have thought an appreciating currency would increase demand-pull inflation? |