Fisheries Economics

6.1.5.2. Demand-Pull Inflation

An increase in aggregate demand indicated by an upward shift in the aggregate demand function may cause a mild increase in the general price level when the economy has involuntary unemployment. However, when the economy has full employment an increase in aggregate demand will simply rise the general price level without any impact on real national income. Such an inflation caused by the excess demand could be controlled by appropriate fiscal and monetary measures.