Statement 1 is correct: According to the quantity theory of money, if the money supply increases faster than output, it leads to more money chasing the same amount of goods, causing inflation. Statement 2 is correct: When output decreases but demand remains the same, there is excess demand relative to supply, which can push prices up (cost-push inflation). Statement 3 is correct: Effective demand refers to the total demand for goods and services at a given price level. If it increases beyond the economy's productive capacity, it causes demand-pull inflation.