Question

Q. Which of the following factors are responsible for cost push inflation:

Select the correct answer using the codes given below:

• A.
  1 only
• B.
  2 only
• C.
  1 and 2 only
• D.
  1, 2 and 3

Answer 1

The correct option is C

1 and 2 only
Explanation:

Statement 1 is correct: Increase in wages will also increase the cost of goods. If more wages have to be paid then it will result in an increase in the price of goods. The wages of workers is one of the main factors affecting the price.

Statement 2 is correct: Devaluation will result in increase in the price of imported commodities. So, products like Petrol which are imported as a result will be costly.

Statement 3 is incorrect: Decrease in tax rates will not result in cost push inflation as it will reduce the price. It is an increase in the tax rates which will cause cost push inflation.