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UPSC PYQPrelims 2021

Civil Services Examination · Question 12

With reference to Indian economy, demand-pull inflation can be caused/increased by which of the following? 1. Expansionary policies 2. Fiscal stimulus 3. Inflation-indexing wages 4. Higher purchasing power 5. Rising interest rates Select the correct answer using the code given below.

  1. 1, 2 and 4 only
  2. 3, 4 and 5 only
  3. 1, 2, 3 and 5 only
  4. 1, 2, 3, 4 and 5
Show answer & explanation

Answer: (A) 1, 2 and 4 only

Explanation

Expansionary policies, fiscal stimulus and higher purchasing power increase aggregate demand. Wage indexation is a cost-push factor, and rising interest rates dampen demand.