Home / Aptitude Tests / Economics / Demand pull inflatio...

Demand pull inflation is likely to be caused by

...

Demand pull inflation is likely to be caused by

A.

An increase in the cost of factors inputs

B.

Increase in the income tax rate

C.

Increase in bank lending rates

D.

Increasingly large budget deficit

View answer & explanation

Correct answer is A

There are five causes for demand-pull inflation:

  1. A growing economy: When consumers feel confident, they will spend more, take on more debt by borrowing more. This leads to a steady increase in demand, which means higher prices.  
  2. Asset inflation: a sudden rise in exports, which translates to an undervaluation of the involved currencies
  3. Government spending: When the government opens up its pocketbooks, it drives up prices. Military spending prices may go up when the government starts to buy more military equipment.
  4. Inflation expectations: forecasts and expectations of inflation, where companies increase their prices to go with the flow of the expected rise
  5. More money in the system: demand-pull inflation is produced by an excess in monetary growth or an expansion of the money supply. Too much money in an economic system with too few goods makes prices increase.

See all Economics questions & answers
See more WAEC questions & answers
Similar Questions

Retailers in an economy perform the function of ______ ...

Which of the following is a disadvantage of localization of industries? ...

Which of the following items is not classified as working capital? ...

Which of the following best explains why more foreign investments are not attracted to West Africa? ...

If a government wants to reduce the level of inflation, it will ...

Production is said to be complete when goods and services gets to the ...

A condition for consumer utility maximization is ...

The price index computed between two time periods is given as 128%,This implies that the ...

Warehouse facilities in the distribution and marketing of products are provided by ...

One of the characteristics of private enterprises is ______? ...

Aptitude Tests

Verbal Reasoning Questions and Answers

Abstract Reasoning Questions and Answers

Personality Test

Puzzles Questions and Answers

Typing Speed and Accuracy Test

Microsoft Office Questions and Answers

Numerical Reasoning Questions and Answers

Logical Reasoning Questions and Answers

Quantitative Reasoning Questions and Answers

Spatial Reasoning Questions and Answers

Nigeria General Knowledge Questions and Answers

Situational Judgement Questions and Answers

Data Interpretation Questions and Answers

See all →


View latest jobs in Nigeria today