Question

True or False: A decrease in the general price level resulting from an increase in the cost of production is known as cost-push inflation, while a fall in the general price level resulting from an excess of total spending is known as demand-pull inflation.

Answer 1

Answer: False. The General price level will only increase. It will not decrease at any cost of having cost pull inflation and the demand full inflation.

Explanation:

For every production of the single unit, the expenses incurred on the wages and the cost incurred on using raw materials  are prominently considered. The rate of demand has an inverse relationship with the increase in the cost of production. Then the price level of the products increases with the effects of Cost-push inflation.

Secondly, The rate of the demand for particular products increases beyond the equilibrium level when the output rate remains below the capacity to meet the requirements of the consumers' demand. In one particular stage, Demand-full inflation takes place which utmost leads to an increase in the price level and acts as a cause for Demand-full inflation.