In context of rising inflation, consider the following:

1.         Situation where too much money chases just few goods
2.         Increased cost of production
3.         Nominal money gap
4.         Increased nominal exchange rate

Which of the statements given above are correct?

Statement 1: It is correct. Several factors determine the inflationary impact in the country. One of the factors is Demand, i.e. when the aggregate demand in the economy has exceeded the aggregate supply or described as a situation where too much money chases just few goods. Example: A country has a capacity of producing just 500 units of a commodity, but the actual demand in the country is 800 units. Hence, due to scarcity in supply, the prices of the commodity rise.  Statement 2: It is correct. The other major factor is supply that is responsible for rising inflation in India. The agricultural scarcity or the damage in transit creates a scarcity causing high inflationary pressures clubbed with high cost of labour increases the final output produced and eventually increasing the production cost and leads to a high price for the commodity. Statement 3: It is correct. Domestic factor is also one of the factors responsible in inflation rising in India. There is a gap in India for both the output and the real money gap. The supply of money grows rapidly while the supply of goods takes due time which causes increased inflation. Similarly, Hoarding has been a problem of major concern in India where onion prices have shot high in the sky. Statement 4: It is correct. External Factors such as exchange rate is also an important component for the inflationary pressures that arises in the India. As the prices in USA rise, it impacts India where the commodities are imported at a higher price impacting the price rise. Hence, the nominal exchange rate and the import inflation are measures that depict the competitiveness and challenges for the economy. Hence, the correct option is 4.