Question

Bottleneck effect is related to what type of inflation?

Cost-push.

Demand-pull.

Structural.

Social.

Social inflation can be related to which one of the following

Structural.

Demand-pull

Supply-side.

Cost-push.

Answer 1

Question 1) option c)

Structural

Structuralist Inflation is prevalent in the Developing and Low-Income Countries.due to the weak structure of their economies. , Which is due to the weak institutions, poor infrastructure and imperfect working of markets.

These imperfections / bottlenecks, like poor roads, highways, underdeveloped agricultural market, imply that some sectors of the economy like agriculture will witness shortages of supply, whereas some sectors like consumer goods will witness excessive demand.

Thus under utilisation of resources will lead to shortage of supply & excess demand in some sectors.

Thus these bottlenecks leads to structuralist form of inflation.

Question 2) option A)

Social inflation is defined as the increase in insurance losses due to factors like higher jury awards, more liberal treatment of claims by workers’ compensation boards, legislated rises in compensation benefit levels.for example,

Large malpractice awards beyond the level of damages incurred.

Thus social inflation is related to structural factors in the Economy.