Demand-Pull Inflation


DEFINITION of '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.


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BREAKING DOWN 'Demand-Pull Inflation'

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.

  1. Supply

    A fundamental economic concept that describes the total amount ...
  2. Inflation

    The rate at which the general level of prices for goods and services ...
  3. Keynesian Economics

    An economic theory of total spending in the economy and its effects ...
  4. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship ...
  5. Scarcity

    The basic economic problem that arises because people have unlimited ...
  6. Demand

    An economic principle that describes a consumer's desire and ...
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