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Causes Of Demand Pull Inflation
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This lesson talks about the various causes of Demand Pull Inflation such as Deficit Financing, Increase in Money Supply, increasing government expenditure, Black money, Population pressure and much more. All the factors are explained in lucid terms.

Ayussh Sanghi is teaching live on Unacademy Plus

Ayussh Sanghi
Passionate Educator - CSE / Other Govt Exams [Peep into my Unacademy Plus Courses & experience awesome learning.]

Unacademy user
good one sir..thanku
Rishi Parvanda
a year ago
Thank you and welcome
your lectures have made economics very interesting....thank you :)
lessons are very lucid so much useful thanku so much ayussh sir n please be continue with other topics related to economics
Sir Couldn't follow the 5th cause about rising liquidity due to public finance tools?? Otherwise very organised approach. Thanks
thank u very much sir
  1. Inflation BY AYUSSH SANGHI Causes of Inflation - Part 4.4


  2. ABOUT ME >Passionate about Teaching >Taught at most reputed Civil Services Institutes >CA, Lawyer Follow me on: https://unacademy.in/user/ AyusshSanghi


  3. Causes of Inflation We have already discussed types of inflation on the basis of causeS: . Demand Pull Inflation Cost Push Inflation


  4. Demand Pull Inflation Multiple factors are responsible for rise in the prices of goods and services. Demand Pull Inflation factors are those due to which there is an overall rise in the demand for goods and services in general. We are going to discuss causes of demand pull inflation.


  5. Causes A. Deficit Financing and Increase in Monev Suppl Increasing government expenditure has to be financed through deficit financing. The alternatives are: raising money through loans or printing of fresh currency The above actions directly pushes up money supply . It increases purchasing power and breeds inflation without a corresponding rise in the supply of goods and services.


  6. Causes B. Increasing Government Expenditure Government expenditure has been rising steadily over the years. . It implies a rising demand for goods and services as it has the effect of putting in large money income in the hands of the general public thereby rising their purchasing power and stoking the fire of inflation. . In India, it is the non plan expenditure, which is mainly responsible because most of the non - plan expenditure is non - productive and hence only adds to purchasing power and demand without adding to production Thus, too much money starts chasing too few goods


  7. Causes C. Black Money Unaccounted or black money plays an important role in pushing up prices by pushing up demand through consumption In fact, estimations reveal black money to be close to 50 per cent of India's GDP and it has a major role in fuelling demand, thus, leading to rise in prices.


  8. Gauses D. Population Pressure Growing population also pressurises the aggregate demand and in turn price level. India is a hugely populated country. Hence the Indian economy is affected due to pressure of population, which results in expansion of demand for goods and services in general and result in inflationary pressure if supply fails to match demand.


  9. Causes E. Foreign Exchange Reserves Rise in foreign exchange reserves leads to corresponding increase in domestic money supply and fuels inflation. As more foreign exchange comes into the country, RBI has to create corresponding domestic money 19


  10. Causes E. Rising Liquidity due to Public Finance Tools Excess liquidity created in the system; due to monetary and fiscal stimulus packages.