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Which of the following statements about the types of inflation is correct?
Demand pull inflation is caused by increase in aggregate demand due to increased private and government spending and is considered constructive to a faster rate of economic growth
Cost push inflation is caused by drop in aggregate supply due to disasters, increased priced of inputs and other reasons.
Built in inflation is induced by adaptive expectation and is often linked to price/wage spiral.
All of the above statements are correct
All the statements are correct. Demand-pull inflation is asserted to arise when aggregate demand in an economy outpaces 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." Cost push inflation is inflation caused by an increase in prices of inputs like labour, raw material, etc. The increased price of the factors of production leads to a decreased supply of these goods. Built-in inflation is a type of inflation that results from past events and persists in the present. Built-in inflation is one of three major determinants of the current inflation rate.
By: Vishal ProfileResourcesReport error
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