Demand for goods and services increases
due to 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.
Anincrease 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 commoditiesavailable 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 demand
increases.
4.
Rapid growth of
population: -A rapidly growing
population increases 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 money supply. Therefore, demand and prices rise.
