Assertion (A) : Cost push inflation is caused by shift in aggregate supply curve.? Reason (R) : Shift in aggregate supply curve takes place because of increase in wages.

Question

Assertion (A) : Cost push inflation is caused by shift in aggregate supply curve.?  Reason (R) : Shift in aggregate supply curve takes place because of increase in wages.

Accepted Answer

A. Both (A) and (R) are true and (R) is the correct explanation of (A).. (2) Both (A) and (R) are true, but (R) is not the correct explanation of (A). (3) (A) is true, but (R) is false. (4) (A) is false, but (R) is true. (5) Question Not Attempted Ans - (1) Explanation:- Types of Inflation Targeting or growthflation The level of inflation which is necessary for the development of the economy. At this level,production increases,and employment opportunities are generated. In India, RBI takes care of it using Monetary policy tools - 4(+/-)2 Crawling The inflation rate is less than 3% Walking The inflation rate is 3-10% Galloping Inflation rate of more than 10% Hyperinflation Very high and typically accelerating inflation More than 50% monthly Eg. - Venezuela (2018) Zimbabwe (2008) Skewflation Skewflation is a type of inflation in which the prices of a single commodity or a set of commodities rise while the overall price level remains stable. Eg. - Food inflation (Tomato price rise) Demand-Pull Inflation Prices are rising because people have excess money Eg. - 7th Pay commission Cost-Push Inflation Price rise due to increased cost of inputs Eg. - Increased crude oil prices, Increased wages of laborers Stagflation Persistent high inflation + high unemployment and low growth PYQ’s Solution English 19 Major Economic Problems and Government Initiatives, Economic Reforms and Liberalization