Answer to Question #137207 in Macroeconomics for December

Question

48. Which of the following best describes a difference between demand-pull inflation and cost-push inflation?

[1] Demand-pull inflation occurs when there is a shortage in aggregate demand, while cost- push inflation is the upward pressure on the general price level due to rising cost of production.

[2] Cost-push inflation can be caused by increases in the cost of wages and intermediate goods, while demand-pull can be caused by increase in exports.

[3] Demand-pull inflation is triggered by increases in the cost of production, while cost-push inflation occurs when the aggregate demand for goods and services increases while aggregate supply remains unchanged.

[4] There is no difference between demand-pull inflation and cost-push inflation as they are triggered by the same sources.

Answer 1

[1] Demand-pull inflation occurs when there is a shortage in aggregate demand, while cost- push inflation is the upward pressure on the general price level due to rising cost of production.