Question

Explain Demand-pull and Cost-push inflation.

Answer 1

1. Demand-Pull Inflation:
Demand and supply play a crucial role in deciding the inflation levels in society at all points in time. For instance, if the demand is high for a product and supply is low, the price of the products increases.

2. Cost-Push Inflation:
When the cost of raw materials and other inputs rises inflation results. An increase in wages paid to labour also leads to inflation.