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The theory that inflation occurs when producers raise prices to meet increased costs is the _____.

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User Sraboy
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The correct answer is: quantity theory

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User Chemistpp
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This is known as the cost-push theory.
The increase in price usually happens due to the fact that the cost of producing goods goes up yet demand remains the same. The factors causing the increase in production cost could be expected or unexpected (could be due to more expensive raw materials, government regulation, employee strikes or even demand for higher wages). Nevertheless these costs must be met and it in order to maintain profitability of the business, the end consumers end up shouldering this extra cost in the form of higher prices which ultimately lead to inflation.
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User Amankkg
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