Three causes of demand pull inflation are :
i. Increase in Money supply: The first major cause at demand pull inflation is increase in the supply of money which leads to increase in aggregate demand. Supply of money includes currency with the public and demand deposits at banks. This is money in spendable form Demand deposits at banks can be withdrawn at any time and hence are in spendable form. Demand deposits, thus act as medium of exchange.
ii. 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.
iii. Increase in population: Increase in population is another major cause responsible for rise in prices. Increase in population means increased demand for consumer goods. It increases the aggregate demand for goods. It increases the aggregate demand for goods and services and puts pressure on the existing supply of goods and services.
