Which one of the following is not a component of demand-pull inflation?

An increase in government expenditure with no change in tax rate

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A downward shift in savings function

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A rise in the money wage rate

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An upward shift of investment function

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Solution

The correct option is B A rise in the money wage rate
Demand pull inflation refers to that situation where increased demand leads to a rise in the inflation level. The real factors that cause demand-pull inflation are given below:
(i) Increase in Govt spending given the tax revenue.
(ii) Cut in tax rates without change in Govt expenditure.
(iii) Upward shift in investment function.
(iv) Downward shift in savings function.
(v) Upward shift in export function.
(vi) Downward shift in import function.

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Select the correct answer using the codes given below.

Consider an economy described by the following functions: C = 20 + 0.80Y, I = 30, G = 50, TR = 100 (a) Find the equilibrium level of income and the autonomous expenditure multiplier in the model. (b) If government expenditure increases by 30, what is the impact on equilibrium income? (c) If a lump-sum tax of 30 is added to pay for the increase in government purchases, how will equilibrium income change?

Consider an economy described by the following function: C = 20 + 0.80Y, I = 30, G = 50, TR = 100.

(i) Find the equilibrium level of income and the autonomous expenditure multiplier in the model.

(ii) If government expenditure increases by 30, what is the impact on equilibrium income?

(iii) If a lump sum tax of 30 is added to pay for the increase in government purchases, how will equilibrium income change?

Q. The saving function of an economy is given as:

S = - 40 + 0.4 (Y)

. Calculate the total increase in income if investment expenditure increases by

R s .700

crores.

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