What triggers demand-pull inflation?

Demand-pull inflation occurs when the overall demand for goods and services in an economy exceeds the available supply, leading to an increase in prices. This situation can arise from various factors, such as increased consumer spending, government expenditure, or investment. When demand outstrips productive capacity, producers may struggle to meet this excess demand, driving up prices as they respond to the heightened competition for limited goods and services.

In contrast, increased production costs, international trade deficits, and high unemployment rates do not directly lead to demand-pull inflation. Increased production costs are more closely related to cost-push inflation, where the cost of inputs rises and leads to higher prices for consumers. International trade deficits could affect currency values and prices but are not a direct cause of demand exceeding supply domestically. High unemployment rates typically signify weaker demand in the economy, which would not trigger inflation but could lead to deflationary pressure instead.