{"id":85351,"date":"2025-06-01T03:13:13","date_gmt":"2025-06-01T03:13:13","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=85351"},"modified":"2025-06-01T03:13:13","modified_gmt":"2025-06-01T03:13:13","slug":"which-one-of-the-following-situations-can-lead-to-inflation","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/which-one-of-the-following-situations-can-lead-to-inflation\/","title":{"rendered":"Which one of the following situations can lead to inflation?"},"content":{"rendered":"

Which one of the following situations can lead to inflation?<\/p>\n

[amp_mcq option1=”Rapid growth of aggregate demand outweighing supply” option2=”Sluggish growth of aggregate demand” option3=”Reduction in the money supply” option4=”Higher levels of unemployment” correct=”option1″]<\/p>\n

\n
\n
This question was previously asked in<\/div>\n
UPSC CDS-1 – 2023<\/div>\n<\/div>\n
Download PDF<\/a>Attempt Online<\/a><\/div>\n<\/div>\n
\nThe correct answer is A) Rapid growth of aggregate demand outweighing supply. Inflation is a general increase in the price level. When the total demand for goods and services in an economy (aggregate demand) grows faster than the economy’s ability to produce those goods and services (aggregate supply), it leads to demand-pull inflation as consumers bid up prices.
\n<\/section>\n
\n– Inflation can be caused by factors affecting demand (demand-pull inflation) or factors affecting supply (cost-push inflation).
\n– Rapid growth of aggregate demand relative to supply creates upward pressure on prices.
\n– Sluggish demand growth typically leads to disinflation or deflation.
\n– Reduction in money supply is a monetary policy tool usually used to *combat* inflation by reducing aggregate demand.
\n– Higher levels of unemployment are usually associated with slack in the economy and low demand, which reduces inflationary pressure.
\n<\/section>\n
\nOther causes of inflation include increases in the cost of production (cost-push inflation), expectations of future inflation, and structural rigidities in the economy. However, excess aggregate demand is a fundamental driver of inflation.
\n<\/section>\n","protected":false},"excerpt":{"rendered":"

Which one of the following situations can lead to inflation? [amp_mcq option1=”Rapid growth of aggregate demand outweighing supply” option2=”Sluggish growth of aggregate demand” option3=”Reduction in the money supply” option4=”Higher levels of unemployment” correct=”option1″] This question was previously asked in UPSC CDS-1 – 2023 Download PDFAttempt Online The correct answer is A) Rapid growth of aggregate … <\/p>\n

Detailed SolutionWhich one of the following situations can lead to inflation?<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1087],"tags":[1105,1120,1190],"class_list":["post-85351","post","type-post","status-publish","format-standard","hentry","category-upsc-cds-1","tag-1105","tag-economic-development","tag-money-banking","no-featured-image-padding"],"yoast_head":"\nWhich one of the following situations can lead to inflation?<\/title>\n<meta name=\"description\" content=\"The correct answer is A) Rapid growth of aggregate demand outweighing supply. Inflation is a general increase in the price level. 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Inflation is a general increase in the price level. When the total demand for goods and services in an economy (aggregate demand) grows faster than the economy's ability to produce those goods and services (aggregate supply), it leads to demand-pull inflation as consumers bid up prices. - Inflation can be caused by factors affecting demand (demand-pull inflation) or factors affecting supply (cost-push inflation). - Rapid growth of aggregate demand relative to supply creates upward pressure on prices. - Sluggish demand growth typically leads to disinflation or deflation. - Reduction in money supply is a monetary policy tool usually used to *combat* inflation by reducing aggregate demand. - Higher levels of unemployment are usually associated with slack in the economy and low demand, which reduces inflationary pressure.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/exam.pscnotes.com\/mcq\/which-one-of-the-following-situations-can-lead-to-inflation\/\" \/>\n<meta property=\"og:site_name\" content=\"MCQ and Quiz for Exams\" \/>\n<meta property=\"article:published_time\" content=\"2025-06-01T03:13:13+00:00\" \/>\n<meta name=\"author\" content=\"rawan239\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"rawan239\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"1 minute\" \/>\n<!-- \/ Yoast SEO Premium plugin. -->","yoast_head_json":{"title":"Which one of the following situations can lead to inflation?","description":"The correct answer is A) Rapid growth of aggregate demand outweighing supply. 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