Demand Pull inflation: 

Demand Pull inflation occurs when total demand for goods and services exceeds total supply. This type of inflation happens when there has been excessive growth in aggregate demand and there is an inflationary gap. Demand-pull inflation is often monetary in origin - because the authorities allow the money supply to grow faster than the ability of the economy to supply goods and services. The phrase that is often used is that there is "too much money chasing too few goods". Demand Pull Inflation basically thrives on the escalation in the consumer demand on a continuous basis.

The Keynesian economics has explicit explanations about the causes of Demand Pull Inflation. According to Keynesian theory, the more the commercial firms of a country offer employment to people, there is more and more rise in the aggregate demand. This rise in demand enables the commercial firms to employ people further, in order to derive maximum output. Because of the restrictions of capacity, the level of output would fail to meet the prevailing demand. Hence the prices of the products would automatically rise. Initially, there is a fall in the unemployment, which subsequently increases. On the other hand, increase in the demand for labor indicates that more workers are required by the commercial firms, to increase and maintain their output levels. Demand Pull Inflation takes place when the total demand for goods and services surpasses that of the total supply. In fact, Demand Pull Inflation occurs when there is exuberant growth in aggregate demand, followed by an inflationary disruption.

Demand Pull Inflation is characterized by an increase in the Gross Domestic Product (GDP) and reduction in the unemployment problem. It is at this phase, that the economy of a country can be said to be moving along the Phillips Curve. Generally, the theory of Demand Pull Inflation is associated with that of Keynesian economics.