Question

Give two causes of demand pull inflation.

Mention two factors which cause demand pull inflation.

Describe briefly three causes of demand pull inflation.

State two factors causing demand pull inflation.

Explain any two causes of demand pull inflation.

Explain any four factors that cause demand pull inflation.

Answer 1

Demand pull inflation is mainly caused by the following factors:

1. Increase in Money Supply: The first major cause of demand pull inflation is an increase in the supply of money, which leads to an increase in aggregate demand. The supply of money includes currency with the public and demand deposits at banks. This is money in spendable form), which ultimately results in inflation. 
2. Increase in Disposable Income: When the disposable income of the people increases, it raises their demand for goods and services, leading to demand pull inflation.
3. Increase in Population: An increase in population is another major cause responsible for the rise in prices. Increase in population means increased demand for consumer goods. It increases the aggregate demand for goods and services and puts pressure on the existing supply of goods and services.
4. Increase in Export Demand: Expansion in foreign demand, as a result, an increase in exports will raise the incomes of poor people. This will push up demand for goods & services within the country.
5. High Rate of Investment: The heavy investments made by the government as well as private industrialists have resulted in a continuous increase in the prices of capital goods and other items of production.