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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
Derive the two alternative conditions of expressing national income equilibrium. Show these equilibrium conditions on a single diagram.
Explain the role of Cash Reserve Ratio in removing an inflationary gap
explain the role of Bank Rate in correcting deficient demand?
Explain the subjective factors which determine consumption function.
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Explain the following concepts or give definitions.
Depreciation
Fill in the blank with appropriate alternatives given below
The General Theory of Employment, Interest and Money was written by __________.
Match the following Group:
| Group A | Group B | ||
| 1) | Aggregate Supply | a) | Expected receipts |
| 2) | Autonomous Investment | b) | Lord J. M. Keynes |
| 3) | Consumption | c) | Government Investment |
| 4) | A.P.C. | d) | ΔC/ΔY |
| 5) | Investment | e) | C/Y |
| f) | Addition to stock of capital | ||
| g) | Destruction of utility | ||
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Aggregate supply is influenced by the state of technology only.
Answer the following question.
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It is seen that the private consumption expenditure, private investment expenditure, and ex-ante savings have reduced the ______ in the economy.
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The equilibrium level of income/output is established when ______
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When aggregate demand is greater than aggregate supply, inventories:
“In an economy ex-ante Aggregate Demand is less than ex-ante Aggregate Supply.”
Explain its impact on the level of output, income and employment.
