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Demand-Pull Inflation
       
 
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Demand-Pull Inflation

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Demand-Pull Inflation
A term used in Keynesian Economics to describe the scenario that occurs when price levels rise because of an imbalance in the aggregate supply and demand.
    
When the aggregate demand in an economy strongly outweighs the aggregate supply, prices increase. Economists Will often say that demand-pull Inflation is a result of too many dollars chasing too few goods.
    
This type of Inflation is a result of strong consumer demand. When many individuals are trying to purchase the same good, the price Will inevitably increase. When this happens across the entire economy for all goods, it is known as demand-pull Inflation. It arises when aggregate demand in an economy outpaces aggregate supply.
    
It involves Inflation rising as real gross domestic product rises and unemployment falls, as the economy moves along the Phillips Curve. This is commonly described as "too much money chasing too few goods". More accurately, it should be described as involving "too much money spent chasing too few goods", since only money that is spent on goods and services can cause Inflation. This would not be expected to persist over time due to increases in supply, unless the economy is already at a full employment level.
Posted by  Convention of Independent Financial Advisors CIFA, Institute for International Research
 
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