ECONOMICS
INFLATION
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A Cost-push inflation can be caused by a rising exchange rate.
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B Cost-push inflation can be caused by lower indirect taxes.
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C Demand-pull inflation can be caused by a rising exchange rate.
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D Demand-pull inflation can be caused by lower direct taxes.
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Detailed explanation-1: -More jobs and higher wages increase household incomes and lead to a rise in consumer spending, further increasing aggregate demand and the scope for firms to increase the prices of their goods and services. When this happens across a large number of businesses and sectors, this leads to an increase in inflation.
Detailed explanation-2: -The correct answer is Increase in money supply and Fall in production. Inflation is a caused when there is an increase in money supply and fall in production. Also occurs due to rising prices of goods and services in an economy.
Detailed explanation-3: -Too little supply or too much demand can mean higher prices for everybody. Demand-pull inflation is when growing demand for goods or services meets insufficient supply, which drives prices higher.
Detailed explanation-4: -Demand-pull inflation is a tenet of Keynesian economics that describes the effects of an imbalance in aggregate supply and demand. When the aggregate demand in an economy strongly outweighs the aggregate supply, prices go up. This is the most common cause of inflation.