Demand-pull inflation is caused by: MCQ with Answer and Explanation

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Demand-pull inflation is caused by:

A. decrease in government expenditure

B. an increase in production costs

C. aggregate demand exceeding aggregate supply at full employment

D. a fall in money supply

Answer: Option C

Solution (By JKSSB Mock Tests)

Demand-pull inflation occurs when aggregate demand exceeds aggregate supply.

This question belongs to: Economy GK Economy Set 1

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Question #1

Which of the following is a feature of the 'Dornbusch Overshooting' model?

A. Prices are fully flexible and exchange rates never overshoot

B. Only real shocks matter

C. Exchange rates may overshoot their long-run values in response to monetary shocks because of sticky prices

D. Exchange rates always adjust gradually

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Correct Answer: Option C

Explanation:
In Dornbusch’s overshooting model, sticky goods prices cause the exchange rate to jump more than proportionally to a monetary shock in the short run so that uncovered interest parity can hold.

This question belongs to: Economy GK Economy Set 1

Question #2

The 'Goods and Services Tax' on cloud services is:

A. 18%

B. 28%

C. 12%

D. 5%

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Correct Answer: Option A

Explanation:
Cloud services attract 18% GST.

This question belongs to: Economy GK Economy Set 1

Question #3

Which institution primarily provides short-term financial assistance to countries facing balance of payments problems?

A. IMF

B. ADB

C. World Bank

D. WTO

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Correct Answer: Option A

Explanation:
The IMF provides short-term financial assistance to countries with balance of payments problems.

This question belongs to: Economy GK Economy Set 1

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