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प्रश्न
Discuss the situation when aggregate demand is more than aggregate supply at full employment income level.
उत्तर
If the actual aggregate demand for output (ADE) is above the aggregate supply shown by the 45 degree line at the full employment level of output then there exists excess demand.
In other words, excess demand refers to a situation where the aggregate demand for output is more than the full employment level of output.
Due to the excess of aggregate demand, there exists a difference (or gap) between the actual level of aggregate demand and full employment level of demand. This difference is termed as inflationary gap. This gap measures the amount of surplus in the level of aggregate demand. Graphically, it is represented by the vertical distance between the actual level of aggregate demand (ADE) and the full employment level of output (ADF). In the figure, EY denotes the aggregate demand at the full employment level of output and FYdenotes the actual aggregate demand. The vertical distance between these two represents inflationary gap. That is,
FY – EY = FE (Inflationary Gap)
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संबंधित प्रश्न
Explain national income equilibrium through aggregate demand and aggregate supply. Use diagram. Also explain the changes that take place in an economy when the economy is not in equilibrium
Explain the concept of 'excess demand' in macroeconomics. Also explain the role of 'open market operation' in correcting it.
Explain the concept of 'deficient demand' in macroeconomics.
Define aggregate supply?
Name any two components of 'aggregate demand'.
Explain the role of 'Margin Requirements' in removing this deficient demand gap.
What is 'consumption function'?
Explain with reason, whether you agree or disagree with the following statement:
Aggregate supply is influenced only by availability of natural resources.
State whether the following statements are True or False with reason:
Income earned from foreign investment is considered for aggregate demand.
Fill in the blank with appropriate alternatives given below
The General Theory of Employment, Interest and Money was written by __________.
Fill in the blank with appropriate alternatives given below
That part of income, which is not spent on consumption, is called __________.
Define or Explain the following concept:
Aggregate Supply
Answer the following question.
Explain the concept of deficient demand with the help of aggregate demand and aggregate supply curves. Discuss one physical and one monetary measure to correct it.
On which concept does classical viewpoint depend?
An increase in aggregate demand of equilibrium level of income and employment causes an increase in ______
The difference between the Aggregate Demand at above full employment and Aggregate Demand at full employment is known as ______
How is it determined by using Saving and Investment approach?
In case of an under-employment equilibrium, which of the following alternatives is not true?
Identify the correctly matched pair from Column A to Column B:
| Column A | Column B |
| (1) Y = AD | (a) Level of output at full employment |
| (2) Forward Multiplier | (b) Withdrawal of investment decreases income |
| (3) Paradox of Thrift | (c) People save less or same as before |
| (4) Multiplier (k) < 1 | (d) 0 < MPC < 1 |
It is seen that the private consumption expenditure, private investment expenditure, and ex-ante savings have reduced the ______ in the economy.
