32. Which among the following can result in ‘demand pull inflation’?
1. Increase in subsidy on LPG
2. Increase in fuel prices
3. Decrease in income tax rates
Select the correct answer using the codes given below.

Only 1 and 2

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Only 1 and 3

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Only 2 and 3

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All of the above

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Solution

The correct option is B Only 1 and 3
Increase in subsidy of LPG will reduce the pocket expenditure of people on LPG, making more money available with them, thereby increasing demand and pulling inflation. Similar will be the effect of decrease of income tax rates – more money availability. Increase in fuel prices will lead to cost-push inflation

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List - I (Type of Inflation)	List - II (Characteristic)
A. Demand-pull Inflation	1. Initially price rises
B. Cost-push Inflation	2. Price-rise controlled by rationing and other means
C. Suppressed Inflation	3. Inflation in which prices increase as a result of increased production costs, as labour and raw materials, even when demand remains the same
D. Creeping Inflation	4. Inflation in which rising demand results in a rise in prices. 5. Fall in price of raw materials

Q. With reference to the demand-pull inflation, which of the following causes is/are correct?

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