If Ratio of Govt Spending to Tax Receipts falls, would it not suggest an increase in inflation ? As the govt would start to slowly reduce spending. Moreover the tax receipts would increase on account of increased GDP. Please tell me if I am right ? Moreover would you link Increase in Crude oil price with inflation ? The Solution does not seem to have a mention of both of these factors contributing to increase in inflation.
Crude oil - no. Its cause price can go up even when there is shortage in supply and that doesn’t necessarily mean there’s inflation. Crude can go up if the OPEC plans to cut supply also.
When it comes to inflation, usually its around us the people. Inflation is driven by the CPI which is us. So I wouldn’t go for this either.