ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -When aggregate demand surpasses available supply, higher prices are the result. This is demand-pull inflation. A low unemployment rate is unquestionably good in general, but it can cause inflation because more people have more disposable income.

Detailed explanation-2: -Demand-pull inflation arises when the total demand for goods and services (i.e. ‘aggregate demand’) increases to exceed the supply of goods and services (i.e. ‘aggregate supply’) that can be sustainably produced.

Detailed explanation-3: -When demand for goods or services rises faster than the supply of those goods and services, the result is demand-pull inflation. Demand-pull inflation is when there is an increase in aggregate demand, and the supply remains the same or decreases.

Detailed explanation-4: -Cost-push inflation theorizes that as costs to producers increase from things like rising wages, these higher costs are passed on to consumers. Demand-pull inflation takes the position that prices rise when aggregate demand exceeds the supply of available goods for sustained periods of time.

Detailed explanation-5: -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.