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प्रश्न
Explain the role of 'Open Market Operations' in reducing Deflationary Gap
उत्तर
Aggregate demand is the AD curve and aggregate supply is the AS curve (as shown in the diagram below). While the aggregate demand curve and the aggregate supply curve intersect each other, the full employment equilibrium is attained at Point E. OY is the full employment level of output, and EY is the aggregate demand at full employment level of output. If the aggregate demand decreases below the full employment level of output from EY to CY, then the economy will have deficient demand, i.e. situation of the deflationary gap (EY − CY = EC).
The central bank overcomes the deflationary situation by buying the securities in the market. This increases the circulation of money and it enables the people to increase their ability to purchase more. In this way, the aggregate demand increases to the level of aggregate supply and the economy attain equilibrium.
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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 how government spending can be helpful in removing deficient demand.
Why does consumption curve not start from the origin?
explain the role of Bank Rate in correcting deficient demand?
Write explanatory answer:
What is Aggregate demand ? Explain the determinants of Aggregate demand.
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
That part of income, which is not spent on consumption, is called __________.
Define or Explain the following concept:
Aggregate Supply
Distinguish between:
Aggregate Demand and Aggregate Supply
Write Short note on:
Average Propensity to Consume
State with reason whether you agree or disagree with the following statement.
Aggregate supply is influenced by the state of technology only.
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.
Discuss the working of the adjustment mechanism in the following situations:
Aggregate demand is greater than the aggregate supply.
Answer the following question.
What is meant by the "Effective Demand Principle" in the Keynesian theory of employment? Discuss using a schedule or a diagram.
The main component of aggregate demand is ______
The difference between the Aggregate Demand at above full employment and Aggregate Demand at full employment is known as ______
Aggregate supply is equal to ______.
It is seen that the private consumption expenditure, private investment expenditure, and ex-ante savings have reduced the ______ in the economy.
Why is effective demand also known as expost demand?
If aggregate demand exceeds aggregate supply in a situation of full employment, what will be its impact on the economy?
