Correct answer: (a) 1, 2 and 4 only
Explanation
- A
1, 2 and 4 only
1, 2 and 4 only. Expansionary policy, fiscal stimulus and higher purchasing power pull demand. Inflation-indexed wages are more cost-push; rising rates cool demand.
- B
3, 4 and 5 only
3, 4 and 5 only. Rates up are disinflationary.
- C
1, 2, 3 and 5 only (d)1, 2, 3, 4 and 5
1, 2, 3 and 5 only. Mixes push and a rate rise.
- D
1, 2, 3, 4 and 5
All five. Rising interest rates do not cause demand-pull inflation.
Summary. Official key is (a) 1, 2 and 4 only. Demand-pull inflation is too much spending: expansionary policy, fiscal stimulus, higher purchasing power. Indexed wages are a cost channel; higher rates restrain demand.
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