What type of inflation would this situation cause?an increase in consumer optimism about the future. Consumers are encouraged to spend more money because they dont see a need to save for a rainy day.

INFLATION

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

What type of inflation would this situation cause?an increase in consumer optimism about the future. Consumers are encouraged to spend more money because they don’t see a need to save for ‘a rainy day’.

A	Demand-led
B	Cost-push
C	Either A or B
D	None of the above

Explanation:

Detailed explanation-1: -Based on speed, there are 4 different types of inflation – hyperinflation, galloping, walking, and creeping.

Detailed explanation-2: -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-3: -Cost-push inflation occurs when overall prices increase (inflation) due to increases in the cost of wages and raw materials. Cost-push inflation can occur when higher costs of production decrease the aggregate supply (the amount of total production) in the economy.

Detailed explanation-4: -There are two main causes of inflation: demand-pull and cost-push. Both are responsible for a general rise in prices in an economy, but each works differently to put pressure on prices. Demand-pull conditions occur when demand from consumers pulls prices up, while cost-push occurs when supply costs force prices higher.

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ECONOMICS (CBSE/UGC NET)

ECONOMICS

INFLATION