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 ?
Although imports might meet some of the extra demand and mitigate the price increase, excess aggregate demand is likely to lead to demand-pull inflation. This possibility is illustrated in the Phillips curve model and also in the expectations-augmented Phillips curve.
The second lesson plan, "Where Did the Too Many Dollars Come From?" aims to have students experience "demand-pull inflation" while gaining insight into three major sources of the "too many dollars," which chase after the "too few goods and services." The lesson plan states a purpose; sets forth objectives; lists materials needed; and gives step-by-step procedures.
Right, demand-pull inflation. Nowhere is this more evident than in the United States.
In this respect, the question of whether it is possible to implement a test which will distinguish between cost-push and demand-pull inflation has a direct relevance to the selection of policies designed to avoid inflation.
There is a difference between cost-push and demand-pull inflation and both are tackled differently.
That would build up needed infrastructure, and also cause little impact towards demand-pull inflation. In the same vein, government should purchase foreign currency from international markets and in a hedged way to curtail exchange rate volatility and so that it provides foreign currency at a subsidised rate to importers, who would use that to boost the needed competitiveness of their exports.
The cost-push inflation, as opposed to demand-pull inflation, results in deceleration in the real output, which adversely affects the level of employment.
'Continued coordination of minimum wage hikes with other regions, particularly in the National Capital Region (NCR), would help contain demand-pull inflation and ease pressure for further monetary tightening,' it added.
Mohd Afzanizam also said last year's 5.9 per cent growth indicated that the economy might have been growing above its potential and gave the impression that demand-pull inflation was prevalent.
That is why and how central banks use interest-rate increases to help mitigate demand-pull inflation. If 'cheap' money is creating excessive demand and higher prices, then cheap money must be taken away.
Demand-pull inflation arises from a positive output gap ([x.sup.t] > 0) A variety of influences can boost real aggregate demand.

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