With reference to Indian economy demand pull inflation can be caused increased by which of the follo...........

Economic Affairs Inflation

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With reference to Indian economy, demand-pull inflation can be caused/ increased by which of the following?

1.Expansionary policies

2.Fiscal stimulus

3.Inflation-indexing wages

4.Higher purchasing power

5.Rising interest rates

Select the correct answer using the code given below

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Explanation:

Correct: Expansionary policies, whether monetary or fiscal, increase the amount of money in the system, which can drive up demand and prices.

Correct: Fiscal stimulus, which involves increased government spending or tax cuts, can lead to an increase in aggregate demand, potentially leading to demand-pull inflation.

Incorrect: Inflation-indexing wages can contribute to cost-push inflation rather than demand-pull inflation. This is because as wages rise to keep up with inflation, the cost of producing goods and services may increase, leading to increased prices.

Correct: Higher purchasing power means consumers have more money to spend, which can lead to increased demand for goods and services and potentially result in demand-pull inflation.

Incorrect: Rising interest rates typically act as a brake on inflation by making borrowing more expensive, which can slow down consumer spending and investment.