Question

inflation caused by an increase in money supply is called:

a demand pull

b cost push

c administrative inflation

d a combination of administrative and speculative inflation

Answer 1

Answer - Option A

Demand pull inflation.

When the Federal bank increases the money supply , the money will the supply increases and their purchasing power increases. As a result they demand more goods and services and the prices of goods as a result rise. This is called the demand pull inflation.

In cost push inflation , the cost of the goods and services rise and not the money supply , administrative inflation is caused by the actions of the government and not the market forces of demand and supply. Hence option A will be most accurate.