ECONOMICS
INFLATION
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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a decrease in price due to a decrease in supply
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a rise in price level due to an increase in demand
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a decrease in price due to an increase in supply
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None of the above
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Detailed explanation-1: -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-2: -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-3: -Demand-pull inflation arises when the total demand for goods and services (i.e. ‘aggregate demand’) increases to exceed the supply of goods and services (i.e. ‘aggregate supply’) that can be sustainably produced.
Detailed explanation-4: -Demand-pull inflation explains rising prices in an economy as the result of increased aggregate demand that surpasses supply.
Detailed explanation-5: -Economists describe cost-push inflation as a condition when the supply of goods or services is limited in some way but demand remains the same, pushing up prices. The increased price of labor or raw materials, for example, leads to decreased supply of these goods.