[Solved] Which of the following scenarios is an example of demand-pull inflation? — Ans: Government increases spending leading to higher consumer demand | Economic Awareness

Economic Awareness - Sectors of Indian Economy

Which of the following scenarios is an example of demand-pull inflation?

AA sudden increase in oil prices raises production costs for manufacturers

BA drought reduces agricultural output causing food prices to rise

CGovernment increases spending leading to higher consumer demand

DCentral bank tightens money supply reducing liquidity

Step-by-Step Solution

Step 1: Identify demand-pull inflation scenario
Demand-pull inflation occurs when aggregate demand increases, pushing prices up.
Step 2: Analyze options
Government spending increasing consumer demand fits demand-pull inflation. Increase in oil prices and drought relate to cost-push inflation. Tightening money supply reduces inflation.
Final Answer:
Government increases spending leading to higher consumer demand → Option C
Quick Check:
Demand-pull inflation example = increased government spending ✅

Quick Trick: Demand-pull = too much demand from government or consumers.

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Which of the following scenarios is an example of demand-pull inflation?