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8 May, 2015 - 11:16

One of the possible explanations of inflation is that it is caused by excessive demand on the part of consumers while firms are unable to expand output beyond their productive capacity. This is referred to as demand pull inflation.

During the late 1960's, the United States experienced a period of high economic activity brought about by overall economic growth and the Vietnam war. Producers could not increase their production, while costumers were eager to buy more with their high income. The result was a period of demand pulled inflation.