What is "demand-pull inflation" caused by?

Demand-pull inflation occurs when the overall demand for goods and services in an economy significantly exceeds the available supply. This elevated demand can result from various factors, such as increased consumer spending, investment by businesses, or government expenditure. When demand outpaces supply, producers might raise their prices to balance the supply and demand, resulting in inflation.

In this context, higher demand leads to upward pressure on prices because producers are unable to match the increasing purchasing power of consumers with an equivalent increase in supply. As a result, the general price level increases, highlighting why this phenomenon is referred to as "demand-pull" inflation—demand is pulling prices upward due to its strength relative to supply.

The other options touch on elements related to inflation or economic conditions but do not specifically capture the essence of demand-pull inflation. Increased production costs, resource availability, and price controls pertain more to cost-push inflation or regulatory impacts, rather than the situation where demand itself is the driving force behind rising prices.