Which of the following is not the reason for excess demand?

Fall in the propensity to consume

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Reduction in taxes

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Increase in investments

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Deficit Financing

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Solution

The correct option is A Fall in the propensity to consume
Propensity to consume refers to the proportion of income used as consumption expenditure. The fall in the propensity to consume is not responsible for creating excess demand in an economy.

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Similar questions

Q16) Excessive deficit financing is not good for an economy because

i) It leads to inflation

ii) Pushes up interest rates

iii) Reduces savings in the economy

iv) Leads to crowding out of private sectors

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