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

Demand for goods and services increases due to the following factors:

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: -The government meets the deficit by borrowing from the public and reserve banks and also by printing notes. This raises the money supply. Therefore, demand and prices rise.