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Question
"The Government has raised the exemption limit for the payment of Income tax from ₹ 2 lakh to ₹ 2.5 lakh."
If the situation of deficient demand is prevailing in the economy, what will be the impact of this action taken by the government?
Solution
The increase in the exemption limit from 2 lakh to 2.5 lakh will help to correct the situation of insufficient demand. It will increase disposable income, causing them to increase spending and, as a result, demand will rise. As a result, the government's action to correct deficient demand is commendable.
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