Consider the following statements:

1. Inflationary Gap is a situation which arises when Aggregate demand in the economy falls short of Aggregate Supply at the full employment level.

2. Stagflation is when the growth rate slows down, the level of unemployment remains steadily low and price level remains high.

3. The policy of import substitution also tends to cause inflationary pressures in developing economies.

Which of the above statements is/are correct?