Consider the following statements regarding Cost Push inflation I An increase in factor in...........

Finance (Phase -I & II) Inflation Trends

Consider the following statements regarding Cost-Push inflation:

I. An increase in factor input costs (i.e. wages and raw materials) pushes up prices.

II. The price rise which is the result of increase in the production cost is cost-push inflation.

III. The Keynesian school suggested controls on prices and incomes as direct ways of checking such inflation and ‘moral suasions’ and measures to reduce the monopoly power of trade unions as the indirect measures.

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

Only I

I and II

II and III

All of the above

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Explanation:

An increase in factor input costs (i.e. wages and raw materials) pushes up prices. The price rise which is the result of increase in the production cost is cost-push inflation. The Keynesian school suggested controls on prices and incomes as direct ways of checking such inflation and ‘moral suasions’ and measures to reduce the monopoly power of trade unions as the indirect measures (basically, cost-push inflations chiefly used to happen due to higher wage demanded by the trade unions during the era).

Today, the governments of the world use many tools to check such inflations—reducing excise and custom duties on raw materials, wage revisions, etc.