Ad As Diagram Demand Pull Inflation. A special case is a horizontal as curve which means the price level is constant. Ad is the aggregate demand curve and as 1 and as 2 curves are aggregate supply curves.
Demand pull inflation definition in an aggregate demand and aggregate supply diagram an increase in the aggregate demand curve leads to an increase in the rate of inflation i e when the aggregate demand for goods and services is greater than the aggregate supply. Refer to the above diagram. Former is called demand pull inflation dpi and the latter is called cost push infla tion cpi.
P p m s m s y y.
Ad is the aggregate demand curve and as 1 and as 2 curves are aggregate supply curves. I n an aggregate demand and aggregate supply diagram an increase in the aggregate demand curve leads to an increase in the rate of inflation i e when the aggregate demand for goods and services is greater than the aggregate supply. Inflation is mainly caused by excess demand or decline in aggregate supply or output. The equilibrium occurs at the point where ad and as curve intersect.
