Q: A rise in general level of prices may be caused by
- An increase in the money supply
- A decrease in the aggregate level of output
- An increase in the effective demand
Select the correct answer using the codes given below:
a) 1 only
b) 1 and 2 only
c) 2 and 3 only
d) 1, 2 and 3
Correct Answer: Option (d)
- An increase in the money supply increases the general level of price and cause inflation. A decrease in the aggregate level of output increase the price of commodity due to the demand in the market and an increase in the demand will also increase the price. Hence, option (d) is correct.
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