MONEY AND INFLATION — Economics STD 12 Commerce — Question
Gujarat BoardEnglish MediumSTD 12 CommerceEconomicsMONEY AND INFLATION3 Marks
Question
The evil of over-population results in inflation.
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Answer
Increase in demand:
If the demand of a product rises, its price rises. Similarly, when the demand increases and the supply is lesser than the demand even then price rises.
In economics if inflation takes place due to increase in demand compared to supply then such inflation is called ‘Demand-pull inflation’. The major reasons for increase in demand are following are discussed below.
Over-population:
In India every year the population increases by $2\%.$ The increasing population demands more goods and services. Price rise takes place when the supply is not able to match up with this rising population.
Alternatively, if there is no rise in population i.e. it is steady but the purchasing power of people increases even then it leads to price rise.
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