Differentiate between demand-pull and cost pull inflation.

Demand-pull inflation: which is a situation when aggregate demand largely exceeds available supply of resources & the price are pulled upward due to excessive demand cause by-

·       Increased supply of money

·       Increased marginal efficiency of capital

·       Increased propensity to consume

·       Massive government expenditure

·       Large export surplus.

 Cost-push inflation: cost-push inflation depicting a situation when rising prices of factors of production increase cost of production, which in turn cause rise in prices of the output.

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