ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Demand-pull inflation can be restrained by increasing government spending and reducing taxes.

Detailed explanation-2: -To counter demand pull inflation, governments, and central banks would have to implement a tight monetary and fiscal policy. Examples include increasing the interest rate or lowering government spending or raising taxes. An increase in the interest rate would make consumers spend less on durable goods and housing.

Detailed explanation-3: -when aggregate demand(AD) in the economy is higher than aggregate supply(AS), the prices in the economy rise leading to demand to pull inflation. It cannot be catered to by using the measure that reduces labor productivity as AD will not fall by reducing labor productivity. Thus, this is the correct option.

Detailed explanation-4: -Demand-pull inflation explains rising prices in an economy as the result of increased aggregate demand that surpasses supply. As consumers demand more given limited supply, prices are bid higher.

Detailed explanation-5: -Demand-pull inflation can be a good thing for the economy in the short term, but it is something that needs to be carefully monitored. As demand increases, it can lead to higher prices and inflationary pressures that might eventually cripple an economy.