Analyzing an Inflationary Cycle

An economy experiences a sudden, widespread increase in the cost of energy, a key input for most businesses. Arrange the following events in the most likely causal sequence that would follow, leading to a sustained inflationary period.

An economy experiences a sudden, sharp increase in the cost of raw materials, leading to an initial, unexpected rise in the general price level. Which of the following scenarios best explains how this single event could evolve into a self-perpetuating inflationary cycle?

Explaining the Wage-Price Spiral Mechanism