ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Demand-pull inflation explains rising prices in an economy as the result of increased aggregate demand that surpasses supply. As consumers demand more given limited supply, prices are bid higher.

Detailed explanation-2: -Demand-pull inflation is when there is an increase in aggregate demand, and the supply remains the same or decreases. When supply cannot meet growing demand, prices for goods and services are pulled higher.

Detailed explanation-3: -When the aggregate expenditure exceeds the aggregate supply, there is a shortage of goods and services in the economy. This leads to an increase in the general price level of goods and services leading to demand-pull inflation.

Detailed explanation-4: -Demand pull inflation arises when the aggregate demand becomes more than the aggregate supply in the economy. Cost pull inflation occurs when aggregate demand remains the same but there is a decline in aggregate supply due to external factors that cause rise in price levels.

Detailed explanation-5: -For example, if manufacturing tires suddenly becomes twice as expensive, the prices of those tires will also increase, causing inflation. This could even affect the car market, as car manufacturers will need to pay more to complete their vehicles.