What are some common reasons demand-pull inflation occur?

1 Answer
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.

Demand Pull Inflation