In demand-pull inflation, the demand for goods increases ahead of the supply. Prices go up because of this imbalance. Economists often refer to this scenario as too many dollars chasing too few goods.For demand-pull inflation to occur, there must be a constraint on increased supply. For instance, assume an electronic manufacturer creates a new device that grows increasingly popular. Demand for this device soars. But there is only one factory making the device, and it’s already running at maximum capacity. The device’s price will continue to go up until either demand tapers off or the company can build a bigger factory to produce more devices. There are a number of causes of demand-pull inflation. A growing economy is the most familiar. As consumers grow more confident in economic conditions, they tend to spend more. More spending increases demand for goods and thus prices rise. Another cause of demand-pull inflation is an expectation of inflation itself. Under this scenario, consumers think the purchase power of their money will decline so they buy things as fast as they can to avoid the loss in purchasing power. The increase in demand drives up prices. This can happen on a catastrophic scale in hyperinflationary situations. Government spending policy also causes demand-pull inflation. When the government increases spending, this increases demand, which causes inflation for the goods the government purchases. For instance, if the government upgrades its computers for all its employees, the increased demand will cause computer prices to go up.