How does government spending cause demand pull inflation?

Whenever government begins to go crazy on spending, my personal view is without no doubt it carries a negative impact on growth. read more

Demand-pull inflation is when aggregate demand for a good or service outstrips aggregate supply. It starts with an increase in consumer demand. Typically, sellers meet such an increase with more supply. But when additional supply is unavailable, sellers raise their prices. That results in demand-pull inflation. read more

Don’t get me wrong extensive government spending carries a big stick when it comes to demand-pull inflation, when you look at displacement cost, extraction cost, negative multiplier cost, market distortion cost, inefficiency cost. read more

Government spending can lead to economic growth that results in the central bank growing the money supply too quickly, leading to inflation. But then, so can private-sector spending. But in either case, spending doesn't affect the money supply directly, so it doesn't spur inflation directly. read more