GENERAL KNOWLEDGE

Detailed explanation-1: -With almost everyone gainfully employed and borrowing rates at a low, consumer spending on many goods increases beyond the available supply. That’s demand-pull inflation in action.

Detailed explanation-2: -Demand-pull inflation is a type of inflation that is caused when there is an increase in consumer demand for goods and services. This causes prices to go up as businesses try to meet the increased demand because of a lack of needed supply. This is historically the most common cause of inflation.

Detailed explanation-3: -10 For example, military spending raises prices for military equipment. When the government lowers taxes, it also drives demand. Consumers have more discretionary income to spend on goods and services. When that increases faster than supply, it creates 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.