Concept:Demand-pull inflation arises when aggregate demand exceeds aggregate supply.
Explanation:When total demand in the economy rises faster than production, prices are pulled upward.
This can result from increased government spending, higher consumer spending, or expansionary fiscal policies.
Deficit financing by the government means the government spends more than it earns and borrows or prints money to cover the gap.
This extra money increases the purchasing power in the economy, thereby raising aggregate demand and causing demand-pull inflation.
On the other hand, an increase in production cost causes cost-push inflation, not demand-pull.
Excessive supply of foodstuff would lower prices, not cause inflation.
An increase in import duties mainly raises the cost of imported goods, which is closer to cost-push inflation.
Answer:C. deficit financing by the government.