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Which one of the following is not a component of demand pull inflation?
  • a)
    An increase in government expenditure with no change in tax rate
  • b)
    A downward shift in savings function.
  • c)
    A rise in money wage rate
  • d)
    An upward shift of investment function.
Correct answer is option 'C'. Can you explain this answer?
Verified Answer
Which one of the following is not a component of demand pull inflation...
A rise in money wage rate is not a component of demand pull inflation. This is because ​Demand pull inflation is the inflation caused by the changes in the demand-side factors in the market. We know that prices in an economy are determined by the interaction of the demand and supply forces. In situations where the demand for goods and services exceeds the supply, the prices tend to rise. In other words, demand-pull inflation occurs when the aggregate demand in the economy exceeds the aggregate supply. So, when money wage rises, aggregate supply(AS) curve will shift downward. Therefore, it is not a component of demand pull inflation.
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Which one of the following is not a component of demand pull inflation?a)An increase in government expenditure with no change in tax rateb)A downward shift in savings function.c)A rise in money wage rated)An upward shift of investment function.Correct answer is option 'C'. Can you explain this answer?
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