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DEFINITION of 'Demand-Pull Inflation'. A term used in Keynesian economics to describe the scenario that occurs when price levels rise because of an imbalance in the aggregate supply and demand. When the aggregate demand in an economy strongly outweighs the aggregate supply, prices increase. Economists will often say that demand-pull inflation is a result of too many dollars chasing too few goods.
Each of these four factors are linked to the core principles of supply and demand, and each can lead to an increase in price or inflation. To better understand the difference between cost-push inflation and demand-pull inflation, let's look at their definitions within the context of these four factors.