Demand-pull inflation occurs when aggregate demand in an economy outpaces aggregate supply.
With reference to Indian economy, demand-pull inflation can be caused/increased by which of the following? Expansionary policies Fiscal stimulus Inflation-indexing wages Higher purchasing power Rising interest rates Select the correct answer using the code given below.
Asked in UPSC IAS 2021 · Topic: Money & Banking (Inflation: Types, Causes, Effects, and Monetary Policy Responses)
More Economic Development questions
- Expansionary policies (monetary or fiscal) increase the money supply or government spending/ reduce taxes, leading to higher aggregate demand. 2. Fiscal stimulus is a type of expansionary fiscal policy specifically aimed at boosting demand. 4. Higher purchasing power means consumers and businesses have more ability and willingness to spend, directly increasing aggregate demand. 3. Inflation-indexing wages can contribute to persistent inflation by maintaining demand and fueling a wage-price spiral, but it's often discussed in the context of cost-push or inertial inflation as well. However, maintaining purchasing power supports demand. 5. Rising interest rates reduce borrowing and spending, thus decreasing aggregate demand, which is the opposite of what causes demand-pull inflation. Given the options, {1, 2, 4} represent the most direct and clear drivers of demand-pull inflation. Statement 3 is debatable in its primary classification but does support demand. Statement 5 directly reduces demand. 368. Which one of the following is likely to be the most inflationary in its effects?
- The term 'inflation' refers to the increase in
- The index that measures the average change in the prices of goods and services consumed by urban households is called
- Core CPI inflation is generally lower than headline CPI inflation because
- The rate of inflation is the rate of change of general price level which is measured as
- Inflation in India is
- Inflation is
- The most common measure of estimating inflation in India is