Question

Distinguish between w demand pull inflation and cost push inflation

Answer 1

BASIS FOR COMPARISON between DEMAND-PULL and INFLATION COST-PUSH INFLATION:

Meaning:

When the aggregate demand increases at a faster rate than aggregate supply, it is known as demand-pull inflation.

When there is an increase in the price of inputs, resulting in decrease in the supply of outputs, is is known as cost-push inflation.

Represents:

How price inflation begins?

Why inflation is so difficult to stop, once started?

Caused by:

Monetary and real factors.

Monopolistic groups of the society.

Policy recommendations :

Monetary and fiscal measures

Administrative control on price rise and income policy

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