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What is difference between measure of …

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What is difference between measure of excess demand and deficent demand in 6 mark

    • Posted by Abhishek Gupta 6 years, 2 months ago

    CBSE > Class 12 > Economics
    • 1 answers

    Sia ? 6 years, 2 months ago

    Deficient demand and excess demand can be distinguished from each other in the following manner:

    1. Deficient demand is a situation, which occurs due to excess of aggregate supply of output over the aggregate demand for output at the level of full employment. On the other hand, excess demand is a situation, which occurs due to the excess of aggregate demand for output over the supply of output at the level of full employment.
    2. Deficient demand generates a deflationary gap. But excess demand generates an inflationary gap.
    3. Deficient demand leads to a fall in output, employment, and price level. But excess demand leads only to an increase in the price level. Between the two – excess demand and deficient demand, the latter is worse.

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