An inflation which occurs as a result of increase in production cost is known as

Step 1: Analyze the question The question asks for the type of inflation caused by an increase in production cost. The key phrase is "production cost."

Step 2: Explain the concept Inflation is a sustained rise in the general price level. Economists classify it by cause or by speed:

• By cause: • Demand-pull inflation: "Too much money chasing too few goods." Total demand exceeds the available supply, which pulls prices up. • Cost-push inflation: Producers' costs rise (higher wages, expensive raw materials, higher fuel prices, higher import costs). Producers pass these costs on to consumers as higher prices, so costs push prices up.
• By speed: • Creeping inflation: A slow, gradual rise in prices (usually under about 3% a year). • Hyperinflation / runaway inflation: A extremely rapid rise in prices, often over 50% a month, as in Zimbabwe or Weimar Germany.

Step 3: Solve

• A. Cost-push inflation: caused by rising production costs ✔
• B. Creeping inflation: describes the speed (slow), not the cause ✘
• C. Demand-pull inflation: caused by excess demand, not costs ✘
• D. Hyperinflation: describes extremely fast price rises ✘
• E. Runaway inflation: another name for hyperinflation ✘

Step 4: Answer The correct answer is A. cost-push inflation.

Tip: Link the name to the cause. In "cost-push," the cost of production pushes prices up from the supply side. In "demand-pull," demand pulls prices up. If an option names a speed (creeping, hyper, runaway), it describes how fast prices rise, not why.