Consider the following statements regarding the monetarist view of Demand Pull inflation I ...........

Finance (Phase -I & II) Inflation Trends

Consider the following statements regarding the monetarist view of Demand-Pull inflation:

I. For the monetarists a demand-pull inflation is creation of extra purchasing power to the consumer over the same level of production.

II. This is the typical case of creating extra money without equivalent creation in production/supply.

Which of the following statement(s) is/are correct?

Only I

Only II

Both I and II

Neither I nor II

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Explanation:

For the monetarists a demand-pull inflation is creation of extra purchasing power to the consumer over the same level of production (which happens due to wage revisions at micro level and deficit financing at the macro level).

This is the typical case of creating extra money (either by printing or public borrowing) without equivalent creation in production/supply i.e., ‘too much money chasing too little output’—the ultimate source of demand-pull inflation.