Q. With reference. to Indian economy, demand-pull inflation can be caused/ increased by which of the following?
1. Expansionary policies
2. Fiscal stimulus
3. Inflation-indexing wages
4. Higher purchasing power
5. Rising interest rates
Select the correct answer using the code given below.

[A] 1, 2 and 4 only

[B] 3, 4 and 5 only

[C] 1, 2, 3 and 5 only

[D] 1, 2, 3, 4 and 5

Answer: A
Notes:

Why this Question) Important static economic concept, current oil, gas prices. 

Ans) a 

Exp) Option a is correct. 

Demand-pull inflation is the upward pressure on prices that follows a shortage in supply, a condition that economists describe as “too many dollars chasing too few goods.” 

  1. Expansionary policies: When the government spends more freely, money in the market is increased. It leads to increase demand for the goods and fuels demand-pull inflation. 
  2. Fiscal Stimulus: It also increases the money in the market leads to increase demand for the goods and fuels demand-pull inflation 
  3. Higher Purchasing Power: When consumers earn higher income, they feel confident and spend more. This leads to more demand and fuels Demand-pull inflation 

Inflation-indexing wages and rising interest rates do not increase or cause demand-pull inflation 

Source:  Demand-Pull Inflation Definition (investopedia.com) 

Subject) Economics

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