With reference to the Demand-Pull Inflation, consider the following statements:
1. Demand-pull inflation exists when aggregate demand for a good or service outstrips aggregate supply.
2. If aggregate demand rises faster than productive capacity, then firms will respond by putting up prices, creating inflation.
3. Demand-Pull inflation is also when overall prices increase (inflation) due to increases in the cost of wages and raw materials.
Which of the above statements is/are correct?
1
1 and 3 only
2
1 and 2 only
3
3 only
4
1, 2 and 3