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Sesi 5

Demand-pull inflation occurs when consumer demand for goods and services exceeds supply, leading to price increases. This can happen due to factors like increased consumer income, government spending, lower interest rates, and rising exports. A real example is the post-COVID economic rebound in the U.S. during 2021-2022, where stimulus checks and low interest rates led to a surge in demand that outpaced supply, resulting in significant price increases.

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524 views1 page

Sesi 5

Demand-pull inflation occurs when consumer demand for goods and services exceeds supply, leading to price increases. This can happen due to factors like increased consumer income, government spending, lower interest rates, and rising exports. A real example is the post-COVID economic rebound in the U.S. during 2021-2022, where stimulus checks and low interest rates led to a surge in demand that outpaced supply, resulting in significant price increases.

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dvangrhn
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After studying the fifth session topic entitled Inflation and also read the additional material, please

give
your own opinion about the following issue. One of the factors that causes inflation is Demand-Pull Inflation.
Please explain how Demand-pull Inflation occur, and give the real example of this inflation.
Demand-Pull Inflation: Explanation and Real Example

Opinion and Explanation:


Pulling demand When an economy's demand for goods and services outpaces its supply, inflation
results. To put it another way, "too much money is chasing too few goods." Prices increase as a result of this
mismatch between strong consumer demand and constrained manufacturing capacity.
There are several reasons why demand might suddenly increase:
 An increase in consumer income
 Expansionary fiscal policies (e.g., government spending or tax cuts)
 Lower interest rates (which encourage borrowing and spending)
 Rising exports due to stronger global demand
When producers can’t keep up with this surge in demand, they raise prices, leading to inflation. This type of
inflation is usually seen in growing economies where consumer confidence is high and people are willing to
spend more.

Real Example:
The post-COVID rebound in the United States in 2021–2022 is a prime illustration of demand-pull
inflation. Customers have more money to spend as a result of the government giving households stimulus
checks and other forms of financial assistance. Interest rates were extremely low at the period, which promoted
borrowing and investment.
Demand for products like electronics, automobiles, and home renovation supplies skyrocketed as the
economy recovered. However, supply was unable to keep up with the growing demand because of earlier supply
chain interruptions during the pandemic. As a result, prices increased significantly across a number of industries,
particularly consumer electronics, housing, and used cars—an example of demand-pull inflation in action.

Conclusion:
Demand-pull inflation, in my view, is a normal byproduct of periods of economic expansion and
recovery; however, it becomes problematic when it increases excessively or is not counterbalanced by sufficient
supply. Careful policy choices, such as modifying interest rates and keeping an eye on government expenditure,
are necessary to control this kind of inflation.

Sumber referensi:
 Mardiani, S. E. (2024). Bahasa Inggris Niaga. Tangerang Selatan: Universitas Terbuka.
 https://sahabat.pegadaian.co.id/artikel/keuangan/demand-pull-inflation
 https://ccianet.org/articles/demand-pull-inflation-why-retailers-raise-prices-more-than-their-input-
costs/#:~:text=Demand%2Dpull%20inflation%20occurs%20when%20the%20demand%20for,fulfill.%
20As%20a%20result%2C%20they%20raise%20prices.

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