ECONOMICS
INFLATION
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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It is a situation when aggregate demand in an economy outpaces aggregate supply
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It is a situation of persistent rise in inflation along with dip in growth and increase in unemployment
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It is a situation caused by an increase in prices of inputs like labour, raw material etc
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It is a situation when a nation experiences very high and accelerating inflation.
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Detailed explanation-1: -Inflation generated by an increase in the price of inputs such as labour, raw materials, and so on is known as cost-push inflation. As the price of the factors of production rises, the supply of these commodities decreases.
Detailed explanation-2: -Explanation: it is a situation when either demand increases for the same level to supply leading increase in price of goods and service or the supply of goods and services decreases for the same level of demand leading to inflation. Thus demand outpaces the supply.
Detailed explanation-3: -A leftward shift of the aggregate supply curve will cause prices to increase. This is called cost-push inflation.
Detailed explanation-4: -Answer and Explanation: Reason: Inflation can be caused due to excessive aggregate expenditure. This type of inflation is called as demand pull inflation. It can also be caused due to increase in input costs of production, in which case it is called as cost push inflation.