A rise in general level of prices may be caused by

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.

  1. 1 and 2 only
  2. 2 and 3 only
  3. 1, 2 and 3
  4. 1 only

Answer

All the three statements lead to either increase in demand of goods and services or decrease in the supply. This leads to increase in general level of prices.

The correct option is C.