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Which of the following is not a reason for inflation?
- a)Increase in administered prices
- b)Increase in cost of capital
- c)More dependence on indirect taxes for revenue
- d)None of these
Correct answer is option 'D'. Can you explain this answer?
Verified Answer
Which of the following is not a reason for inflation?a)Increase in adm...
Inflation refers to rise in the general price level in the economy. Various demand and supply side factors cause inflation.
Most Upvoted Answer
Which of the following is not a reason for inflation?a)Increase in adm...
Explanation:
Inflation refers to the sustained increase in the general price level of goods and services in an economy over a period of time. It is measured using an inflation rate which is the percentage change in the price level over a period of time.
There are several reasons for inflation, some of which are discussed below:
1. Increase in administered prices: Administered prices refer to prices set by the government or other regulatory authorities. When these prices increase, it leads to an increase in the cost of goods and services, which in turn leads to an increase in the general price level and inflation.
2. Increase in cost of capital: The cost of capital refers to the cost of borrowing money or raising equity capital. When the cost of capital increases, it leads to an increase in the cost of production, which in turn leads to an increase in the general price level and inflation.
3. More dependence on indirect taxes for revenue: Indirect taxes such as excise duty, customs duty, and service tax are levied on goods and services. When the government depends more on these taxes for revenue, it leads to an increase in the cost of goods and services, which in turn leads to an increase in the general price level and inflation.
4. None of these: This option is not a reason for inflation as it does not provide any explanation for the increase in the general price level of goods and services.
In conclusion, while there are several reasons for inflation, it is important for policymakers to understand the underlying causes and implement appropriate measures to control inflation and maintain price stability in the economy.
Inflation refers to the sustained increase in the general price level of goods and services in an economy over a period of time. It is measured using an inflation rate which is the percentage change in the price level over a period of time.
There are several reasons for inflation, some of which are discussed below:
1. Increase in administered prices: Administered prices refer to prices set by the government or other regulatory authorities. When these prices increase, it leads to an increase in the cost of goods and services, which in turn leads to an increase in the general price level and inflation.
2. Increase in cost of capital: The cost of capital refers to the cost of borrowing money or raising equity capital. When the cost of capital increases, it leads to an increase in the cost of production, which in turn leads to an increase in the general price level and inflation.
3. More dependence on indirect taxes for revenue: Indirect taxes such as excise duty, customs duty, and service tax are levied on goods and services. When the government depends more on these taxes for revenue, it leads to an increase in the cost of goods and services, which in turn leads to an increase in the general price level and inflation.
4. None of these: This option is not a reason for inflation as it does not provide any explanation for the increase in the general price level of goods and services.
In conclusion, while there are several reasons for inflation, it is important for policymakers to understand the underlying causes and implement appropriate measures to control inflation and maintain price stability in the economy.
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Which of the following is not a reason for inflation?a)Increase in administered pricesb)Increase in cost of capitalc)More dependence on indirect taxes for revenued)None of theseCorrect answer is option 'D'. Can you explain this answer?
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