Answer
Demand-pull inflation happens when the demand for goods strongly outweighs the aggregate supply making prices to go up.
Explanation
A demand pull inflation for a product happens when aggregate demand in an economy outpaces aggregate supply. The inflation in this case will rise with increase in real gross domestic product and fall of unemployment as the economy moves along the Philips curve. This situation can be described as "too much money chasing too few goods”
Answer:
"Demand pull inflation occurs when demand for goods and services increases more quickly than the productive capacity."
Further Explanation:
Inflation occurs when an increase in overall price within an economy. Demand pull inflation occurs when consumer demand is increased and corresponding seller raise the prices on goods. Demand pull inflation have impact on business, households, foreign buyers and governments.
The causes of demand pull inflation include:
The below figure shows that the increase in demand for goods and services from D0 to D1 in short run:
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Answer details:
Keyword:
Demand pull inflation, cost push inflation, demand for goods and services, increase, house price, rising real wages, devaluation, consumer, confidence, rapidly, productive capacity
