In the short run, an increase in aggregate demand results in demand-pull inflation. This occurs when the overall demand for goods and services in an economy exceeds the supply, leading to an increase in prices. Factors contributing to an increase in aggregate demand may include higher consumer spending, increased investment by businesses, government spending, and net exports. As demand increases, businesses may struggle to keep up, causing prices to rise as they attempt to meet the excess demand. This is distinct from cost-push inflation, which arises from an increase in the costs of production.
In the short run, an increase in aggregate demand results in demand-pull .
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