What are the reasons or causes for excess demand?
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The main reasons for excess demand are apparently the increase in the following components of aggregate demand:
- Increase in household consumption demand due to rise in propensity to consume.
- Increase in private investment demand because of rise in credit facilities.
- Increase in public (government) expenditure.
- Increase in export demand.
- Increase in money supply or increase in disposable income.
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