What are some common reasons demand-pull inflation occur?
Dec 4, 2015
Demand pull inflation is caused by demand related factors. It occurs when aggregate demand exceeds aggregate supply.
Causes for Demand Pull Inflation
A Real Factors
1 Increase in consumption of the community and government. 2 Increase in private and government investment. 3 Reduction in tax rates 4 Increased foreign demand for domestic goods.
B Monetary factors
1 Reduction in Bank Rate 2 Open market buying of bonds 3 Reduction in Cash Reserve Ratio.