Read the following statements about inflation and mark the correct one s 1 During Demand Pull ...........

Economic Affairs Inflation

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Read the following statements about inflation and mark the correct one(s)

1) During Demand - Pull inflation the import of goods should be stopped immediately and interest on loans increased.

2) During Cost - Push inflation excise and custom duties on raw materials should be increased.

Only 1

Only 2

Both 1 and 2

None of the above

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Explanation:

Inflation is the general price rise of goods and services. In case of demand pull inflation a mismatch between demand and supply pulls up the prices. Depending upon the situation the goods in short supply are imported and interest on loans increased.

In case of Cost push inflation the cost of production must be reduced therefore excise and custom duties must be reduced.