What is Demand-Pull Inflation?
There really can be too much of a good thing when it comes to economic growth, and the concept of demand-pull inflation bears that out. Demand-pull inflation explains why certain items or services rise in price even when they appear to be in plentiful supply. A booming economy means that factories are hiring more workers and those workers are producing more products. However, these additional employees are also earning more money and want to spend that money on products they may not have able to afford while unemployed or underemployed. Because the demand for these products rises but the supply cannot be increased fast enough to meet it, the price of the products often rises. This price rise during seemingly strong economic times is called demand-pull inflation by those who ascribe to the Keynesian economics model. Demand-pull inflation is often described by many sources as “too much money chasing too few goods,” which is a very apt description of the situation. When unemployment rates
