Question

Which of the followings are correct in the context of inflation?
(A) Higher aggregate demand may lead to demand-pull inflation.
(B) Higher cost of production may lead to cost-push inflation.
(C) Higher international food and fuel prices may lead to inflation.
(D) Higher indirect taxes and lower subsidy may lead to inflation.

• A. (A), (B) and (D) only
• B. (A), (B) and (C) only
• C. (A), (B), (C) and (D)
• D. (B), (C) and (D) only

Hint:

Consider demand and supply side causes of inflation

Answer 1

The Correct Option is C

(A) Elevated aggregate demand results in higher prices, generating *demand-pull inflation*.

(B) Increased production expenses raise the cost of goods, leading to *cost-push inflation*.

(C) Rising international food and fuel prices can inflate domestic prices, contributing to inflation.

(D) Increased taxes and decreased subsidies can elevate costs, causing inflation.

Consequently, all four statements are accurate. Thus, the correct answer is (c).