[Solved] Which of the following best describes demand-pull inflation? — Ans: Inflation caused by an increase in aggregate demand exceeding aggregate supply | Economic Awareness

Economic Awareness - Sectors of Indian Economy

Which of the following best describes demand-pull inflation?

AInflation caused by government-imposed price controls

BInflation caused by rising wages and raw material costs

CInflation caused by a decrease in money supply

DInflation caused by an increase in aggregate demand exceeding aggregate supply

Step-by-Step Solution

Step 1: Identify the concept
The question tests understanding of demand-pull inflation, a fundamental cause of inflation.
Step 2: Apply the concept
Demand-pull inflation occurs when aggregate demand exceeds aggregate supply, causing prices to rise. Rising wages and raw material costs relate to cost-push inflation. Decrease in money supply reduces inflation, and price controls do not cause inflation.
Final Answer:
Inflation caused by an increase in aggregate demand exceeding aggregate supply → Option D
Quick Check:
Demand-pull inflation = excess aggregate demand ✅

Quick Trick: Demand-pull = too much money chasing too few goods.

Common Mistakes:

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