JKSSB Written 2018
Answer & Explanation
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Correct Answer:
Option C —
Demand-pull Inflation
Why Demand-pull Inflation?Demand-pull inflation occurs when the demand for goods and services exceeds the economy's ability to produce them. It is often described by the phrase: "Too much money chasing too few goods."
When the money supply grows excessively (for example, if a government prints too much money or interest rates are very low), people have more cash to spend. This surge in spending "pulls" prices upward because the supply of products cannot keep up with the new, higher demand.
Why the other options are incorrect:
Cost-push Inflation
(A): This is caused by a decrease in supply due to rising costs of production (like higher wages or more expensive raw materials like oil). It "pushes" prices up from the supply side.
Cost-pull / Demand-push (B & D): These are not standard economic terms. They are "distractor" options designed to sound similar to the real terms.
Answer verified by Quintessence Classes faculty — Karan Nagar, Srinagar.