Question

Answer the following question in five or six sentences:

Write any four factors responsible for the increase in demand for goods and services?

Answer 1

1. Increase in Public and Private Expenditure: Due to war, developmental policies, etc., public expenditure increases. It leads to an increase in demand for goods and services in the economy.
An increase in private expenditure leads to a rise in demand for goods and services.

2. Increase in Export: An increase in export reduces the stock of commodities available for home consumption. It creates a shortage of goods in the economy. So demand exceeds the supply.

3. Reduction in Taxation: When taxes are reduced, there is an increase in the purchasing power of consumers. So the demand increases.

4. The rapid growth of population: A rapidly growing population increases the level of demand for goods and services in a country.

5. Deficit financing: Government meets the deficit by borrowing from the public and reserve bank and also by printing notes. This raises the money supply. Therefore, demand and prices rise.