Economic Awareness - Sectors of Indian Economy
Which of the following best explains the cause of demand-pull inflation?
Which of the following best explains the cause of demand-pull inflation?
easy Q1 of 15
Step-by-Step Solution
Step 1: Understand demand-pull inflation
Demand-pull inflation occurs when aggregate demand in the economy exceeds aggregate supply, causing prices to rise.Step 2: Analyze options
Only the increase in aggregate demand exceeding supply correctly explains demand-pull inflation. Rising wages and raw materials cause cost-push inflation. Decrease in money supply and price ceilings reduce inflationary pressures.Final Answer:
Increase in aggregate demand exceeding aggregate supply → Option AQuick Check:
Demand-pull inflation = excess aggregate demand ✅
Quick Trick: Demand-pull = too much demand chasing too few goods.
Common Mistakes:
- Confusing demand-pull with cost-push inflation caused by rising costs.
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