demand-pull inflation

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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 ?
The government can adopt expansionary fiscal and monetary policies, which may cause demand pull inflation; simultaneously it has the power to impose indirect taxes or increase tax rate that may result in cost push inflation and finally it can generate "price/wage spiral" which trigger a process in which workers trying to keep their wages up with rise in prices and employers passing higher costs on to consumers.
However, it is important to note that inflation in Kuwait was demand pull inflation rather than speculative price increases.
High consumer spending, rising bank lending and exceptionally low interest rates and rising demand deposits will maintain the current demand pull inflation. While it is expected that the recent labor market reform initiatives will lead to a cost-push inflationary pressure, the current trend shows this is not the case, at least for now.