With reference to Indian economy, demand-pull inflation can be caused/increased by which of the following?<br/>1. Expansionary policies<br/>2. Fiscal stimulus<br/>3. Inflation-indexing wages<br/>4. Higher purchasing power<br/>5. Rising interest rates<br/><br/>Select the correct answer using the code given below.

1. Expansionary policies — Correct. Expansionary monetary/fiscal policies raise aggregate demand, which can create demand-pull inflation.

2. Fiscal stimulus — Correct. Higher government spending/tax cuts increase disposable income and demand, pushing prices up when supply lags.

3. Inflation-indexing wages — Incorrect. This mainly feeds a wage-price spiral/cost-push persistence, not the primary cause of demand-pull inflation.

4. Higher purchasing power — Correct. When consumers can spend more, aggregate demand rises and may cause demand-pull inflation.

5. Rising interest rates — Incorrect. Higher interest rates usually reduce borrowing and spending, so they are generally anti-inflationary, not demand-pull inflationary.

Hence, the correct set is 1, 2 and 4 only.