Causes and Drivers of Demand-Pull Inflation

Demand-pull inflation happens when aggregate demand exceeds supply. Statements 1, 2, and 4 directly expand money supply and aggregate demand via low rates (expansionary policies), government spendings (fiscal stimulus), and heightened disposable income (higher purchasing power). Statement 3 (inflation-indexing) and cost push elements represent responses or structural cost expansions, while Statement 5 (rising interest rates) reduces consumption and cools down demand-pull inflation. > Any fiscal or monetary mechanism that elevates aggregate public spending and disposable income induces demand-pull inflation. Answer: (a).