Demand-Pull Inflation Law and Legal Definition

Demand-pull inflation arise when aggregate demand in an economy outpaces aggregate supply. This type of inflation results when the four macroeconomic sectors (household, business, government, and foreign) collectively try to purchase more output that the economy is capable of producing. In general, increasing aggregate demand means buyers want more production than the economy is able to provide. Then result is that buyers bid up the price of existing production. The extra demand "pulls" the price level higher.