ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -When demand for goods or services rises faster than the supply of those goods and services, the result is demand-pull inflation. Demand-pull inflation is when there is an increase in aggregate demand, and the supply remains the same or decreases.

Detailed explanation-2: -To prevent demand-pull inflation from getting out of control, the government and finance institutions have several tricks up their sleeves that they can use. For example, the country’s central bank can increase interest rates to counter demand-pull inflation.

Detailed explanation-3: -Demand pull inflation arises when the aggregate demand becomes more than the aggregate supply in the economy. Cost pull inflation occurs when aggregate demand remains the same but there is a decline in aggregate supply due to external factors that cause rise in price levels.

Detailed explanation-4: -Answer and Explanation: The statement, demand-pull inflation can be restrained by increasing government spending and reducing taxes is false.