Multiple choice

Increase in money supply will lead to

  1. cost push inflation

  2. demand pull inflation

  3. structural inflation

  4. none of the above

Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Increase in money supply boosts aggregate demand in the economy, leading to demand-pull inflation. When consumers and businesses have more money to spend, demand increases but supply takes time to adjust, pushing prices up. Cost-push inflation results from increased production costs, not money supply changes.

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