Explain Demand-Pull and Cost Push Inflation.

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Q. Explain Demand-Pull and Cost Push Inflation.

Tamil Nadu DgeTamil Nadu HSC (DGE) Commerce Board 2025Subjective· 3mImportance★★★★★

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Demand-pull inflation is caused by excess aggregate demand over supply, while cost-push inflation is caused by rising costs of production; both raise the general price level.

Demand-Pull Inflation

Occurs when aggregate demand rises faster than aggregate supply at full employment.
Described as 'too much money chasing too few goods'.
Causes include an increase in money supply, higher government spending, rising incomes and easy credit, all of which raise demand.
Excess demand pulls prices upward.

Cost-Push Inflation

Occurs when the cost of production increases even without an increase in demand.
Causes include a rise in wages, higher prices of raw materials and fuel, higher taxes, and the market power of firms or trade unions.
Producers pass on the higher costs to consumers by raising prices, pushing the price level up. …

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Same / Similar Concept — real previous-year questions on the same or a closely similar concept, not this exact question.

CBSE 2025Set MARCH1 markMCQ
$Q. When the prices rise slowly, we call it as :$
(a) deflation
(b) galloping inflation
(c) mild inflation
(d) hyper inflation
›Reveal solutionSolution
A slow rise in prices is called mild (creeping) inflation — option (c).

In the Tamil Nadu HSC Class-12 Economics (Monetary Economics) syllabus, inflation is classified by its speed:

Mild / creeping inflation — prices rise slowly (a small percentage per year); considered healthy for growth.

Galloping inflation — prices rise rapidly, in double or triple digits.

Hyper-inflation — prices rise uncontrollably to very high levels. …
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CBSE 2024Set MARCH1 markMCQ
$Q. Inflation means :$
(a) Value of money is increasing
(b) Prices are rising
(c) Prices are remaining the same
(d) Prices are falling
›Reveal solutionSolution

Inflation means a sustained rise in the general level of prices.

Inflation is a situation in which there is a persistent and appreciable rise in the general price level of goods and services in an economy over a period of time. As prices rise, the same amount of money buys fewer goods, so the value (purchasing power) of money falls.

…

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CBSE 2022Set MARCH1 markMCQ
$Q. Mild Inflation is also known as ________.$
(a) Creeping Inflation
(b) Walking Inflation
(c) Galloping Inflation
(d) Running Inflation
›Reveal solutionSolution
Mild inflation is termed creeping inflation, so the answer is option (a).

On the basis of speed, inflation is graded as:

Creeping inflation — a very slow rise in prices (about 3% a year); this is the mild, harmless form.

Walking inflation — a moderate rise (around 3–10%).

Running / galloping inflation — a rapid, alarming rise. …
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Q.Explain Demand-Pull and Cost Push Inflation.

Concept understanding — Inflation

Q.Explain Demand-Pull and Cost Push Inflation.

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