A rise in general level of prices may be caused by 1. An increase in the money supply 2. A decrease in the aggregate level of output 3. An increase in the effective demand Select the correct answer using the codes given below.

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Q: 57 (IAS/2013)
A rise in general level of prices may be caused by
1. An increase in the money supply
2. A decrease in the aggregate level of output
3. An increase in the effective demand

Select the correct answer using the codes given below.

question_subject: 

Economics

question_exam: 

IAS

stats: 

0,226,58,15,14,29,226

keywords: 

{'money supply': [0, 0, 1, 3], 'effective demand': [0, 0, 0, 2], 'prices': [0, 5, 4, 14], 'increase': [3, 1, 10, 35], 'aggregate level': [0, 0, 0, 1], 'decrease': [0, 0, 0, 1], 'rise': [3, 1, 0, 4], 'general level': [0, 0, 0, 1], 'output': [0, 0, 0, 4]}

A rise in the general level of prices can be caused by all three factors mentioned:

1. An increase in the money supply: When there is an increase in the money supply, it can lead to an increase in aggregate demand, which can result in higher prices as people have more money to spend.

2. A decrease in the aggregate level of output: If the total output of goods and services in an economy decreases, but the money supply remains constant, the demand for those goods and services may exceed the supply, leading to higher prices.

3. An increase in effective demand: When there is an increase in effective demand, meaning an increase in the desire and ability of consumers to purchase goods and services, it can lead to higher prices if the supply cannot keep up with the demand.

Therefore, the correct answer is: 1, 2, and 3.

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