Multiple choice

Demand pull inflation can be caused by money factors including

  1. a fall in the consumption expenditure

  2. a sharp increase in unemployment

  3. a steep reduction in the direct taxation

  4. an increase in the income tax

  5. a sharp decrease in unemployment
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A steep reduction in the direct taxation increases the aggregate demand, thereby causing demand pull inflation.

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