With reference to Indian economy, demand-pull inflation can be caused/increased by which of the following?1.Expansionary policies2.Fiscal stimulus3.Inflation-indexing wages4.Higher purchasing power5.Rising interest ratesSelect the correct answer using the code given below

1. 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.

2. B

   3, 4 and 5 only

   3, 4 and 5 only. Rates up are disinflationary.

3. 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.

4. 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.