With reference to the lsquo bottleneck inflation rsquo which of the following statements is correct ........

Finance (Phase -I & II) Inflation Trends

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With reference to the ‘bottleneck inflation’ which of the following statements is correct?

Bottleneck inflation takes place when the supply falls drastically and the demand remains at the same level.

Bottleneck inflation takes place when the supply falls drastically along with the demand.

Bottleneck inflation takes place when the supply increases rapidly and the demand remains at the same level.

Bottleneck inflation takes place when the supply increases rapidly along with the demand.

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Explanation:

This inflation takes place when the supply falls drastically and the demand remains at the same level. Such situations arise due to supply-side accidents, hazards or mismanagement which is also known as ‘structural inflation’. This could be put in the ‘demand-pull inflation’ category.