demand-pull inflation


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Related to demand-pull inflation: Cost-Push Inflation

Demand-pull inflation

A theory of inflation or price increases resulting from so-called excess demand. Related: Cost-push inflation.

Demand-Pull Inflation

In Keynesian economics, a significant increase in prices that occurs when there is an increase in demand for goods and services such that the increase outpaces supply. The equivalent of demand-pull inflation can occur for any one product, but the term refers to situations where this happens throughout the economy. Demand may increase for a number of reasons; one example is an increase in the money supply. If persons have more money, they are more likely to buy goods and services which, in turn, drives up prices. One way to think of demand-pull inflation is to conceptualize it as too many dollars chasing too few products.

demand-pull inflation

Rising consumer prices resulting from the demand for goods and services exceeding supply. Demand-pull inflation is likely to enhance corporate profits because businesses are able to increase the prices they charge without corresponding increases in their costs. Compare cost-push inflation.

demand-pull inflation

see INFLATION.

demand-pull inflation

a general increase in prices caused by a level of AGGREGATE DEMAND in excess of the supply potential of the economy. At full employment levels of output (POTENTIAL GROSS NATIONAL PRODUCT), excess demand bids up the price of a fixed real output (see INFLATIONARY GAP). According to MONETARISM, excess demand results from too rapid an increase in the MONEY SUPPLY. See INFLATION, QUANTITY THEORY OF MONEY, COST-PUSH INFLATION.
References in periodicals archive ?
Samuelson and Solow (1960) argued that if costs and prices are insignificantly sensitive to demand-restraint policies such that unemployment significantly increases, then cost-push inflation is dominant; and likewise the reverse is true for demand-pull inflation.
The results shown in Table II, III and IV affirm the monetarist claim that monetary expansion leads to demand-pull inflation.
Causality linkages examined in this paper also reveal that the simultaneous existence of both cost-push and demand-pull inflation is possible.
Besides, demand-pull inflation appears to be more explicable through exogeneity of money supply rather than the traditional Keynesian aggregate demand.
For the control of demand-pull inflation, fiscal policy can work without the side effects produced by high interest rates on interest-sensitive sectors of the economy, like housing.
When the output gap was negative and, consequently, demand-pull inflation was in check, the central bank could pursue an expansionary monetary policy.

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