Demand Pull Inflation Diagram Explanation. When the aggregate demand in an economy strongly outweighs the. This later rise in price level from p 1 to p 2 is the result of demand pull inflation.
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Let us now explain inflationary process which starts with demand pull inflation in the first instance. Once the expectation of inflation sets in it s hard to eradicate. Former federal reserve chairman ben bernanke explained it this way.
The demand pull inflation can be shown through the below diagram as well.
It is thus clear that both cost push and demand pull inflation interact to cause inflation in the economy. The second is the expectation of inflation. Explanation of the above demand pull inflation graph is as follows the x axis measures the aggregate demand and supply and the y axis measures the general price level. Demand pull inflation definition.
