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 occurs when aggregate demand for goods and services in an economy rises more rapidly than an economy’s productive capacity. One potential shock to aggregate demand might come from a central bank that rapidly increases the supply of money.

Detailed explanation-3: -Demand-pull Inflation As demand increases, supply remains constant, pulling the prices for goods and services up.

Detailed explanation-4: -Demand-Pull Inflation and the Fed Some measures, like decreasing interest rates, are meant to help boost consumption. When more consumers are encouraged to spend and supply can’t keep up, inflation may get pulled up as a result.

Detailed explanation-5: -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.