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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
State the determinants of aggregate demand.
Explain the concept of 'deficient demand' in macroeconomics.
State three measures to reduce inflationary gap.
Aggregate demand can be increased by ______
Define aggregate supply?
Explain the role of Cash Reserve Ratio in removing an inflationary gap
Explain the determinants of aggregate supply.
What are the determinats of Aggregate demand ?
Write explanatory answer:
What is Aggregate demand ? Explain the determinants of Aggregate demand.
What is ‘effective demand’? How will you derive the autonomous expenditure multiplier when price of final goods and the rate of interest are given?
Answer the following question:
What are the determinants of Aggregate Demand (AD)?
State with reason whether you agree or disagree with the following statement.
Aggregate supply is influenced by the state of technology only.
State with reason whether you agree or disagree with the following statement.
Positive net earnings from foreign transactions add to aggregate demand.
Discuss the working of the adjustment mechanism in the following situations:
Aggregate demand is greater than the aggregate supply.
Answer the following question.
Describe the adjustments that may take place in an economy when ex-ante Aggregate Demand is greater than ex-ante Aggregate Supply.
Keynes theory is associated with ______
It is seen that the private consumption expenditure, private investment expenditure, and ex-ante savings have reduced the ______ in the economy.
The slope of the supply curve is measured by ______.
With the help of a diagram, determine the equilibrium level of output and income by using Aggregate demand and aggregate supply approach.
