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Demand-pull inflation occurs when aggregate demand in an economy is more than aggregate supply. It involves inflation rising as real gross domestic product rises and unemployment falls, as the economy moves along the Phillips curve. This is commonly described as "too much money chasing too few goods". [1]
The definition of inflation is an increase in prices and a subsequent decrease in the purchasing power of money. But demand-pull inflation is slightly more complex, as it occurs when prices go up ...
On the flip side, demand-pull inflation occurs when consumers have resilient interest for a service or good. Such demand could result from things like a low jobless rate, strong consumer ...
In economics, the demand-pull theory is the theory that inflation occurs when demand for goods and services exceeds existing supplies. [1] According to the demand pull theory, there is a range of effects on innovative activity driven by changes in expected demand, the competitive structure of markets, and factors which affect the valuation of new products or the ability of firms to realize ...
Demand shocks may both decrease and increase inflation. So-called demand-pull inflation may be caused by increases in aggregate demand due to increased private and government spending, [83] [84] etc. Conversely, negative demand shocks may be caused by contractionary economic policy.
Demand-pull inflation can also appear even if, strictly speaking, demand isn’t particularly high. Anything that puts the supply/demand equation out of balance will result in demand-pull inflation.
Built-in inflation is a type of inflation that results from past events and persists in the present. Built-in inflation is one of three major determinants of the current inflation rate. In Robert J. Gordon's triangle model of inflation, the current inflation rate equals the sum of demand-pull inflation, cost-push inflation, and built-in inflation.
Whether it’s demand-pull or cost-push inflation or a combination, inflation affects the stock market. For example, moderate to low inflation — when prices rise less than 3 percent — can ...