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: -Answer. outpaces aggregate supply. Explanation: Demand pull inflation occurs when the total demand of goods and services for a particular economy is more than the total supply.
Detailed explanation-2: -Explanation: Based on Aggregate Supply and Aggregate Demand, inflation is divided into two types: Demand-Pull Inflation. This type of inflation is caused due to an increase in aggregate demand in the economy.
Detailed explanation-3: -Demand-pull inflation occurs to arise when aggregate demand in an economy is more than aggregate supply. It involves inflation rising as real gross domestic product rises and unemployment falls, as the economy moves along the Phillips curve. This is commonly described as “too much money chasing too few goods".
Detailed explanation-4: -An outward shift in aggregate supply.
Detailed explanation-5: -Cost-push inflation can occur when higher costs of production decrease the aggregate supply (the amount of total production) in the economy. Since the demand for goods hasn’t changed, the price increases from production are passed onto consumers creating cost-push inflation.