Class 12 Economics Important Chapter 4 Problems of Deficient Demand and Excess Demand

Class 12 Economics Important Chapter 4 Problems of Deficient Demand and Excess Demand Solutions English Medium As Per The New Syllabus to each chapter is provided in the list so that you can easily browse through different chapters ASSEB Class 12 Economics Important Solutions in English and select need one. AHSEC Class 12 Economics Additional Notes Download PDF. HS 2nd Year Economics Additional Solutions.

Class 12 Economics Important Chapter 4 Problems of Deficient Demand and Excess Demand

Also, you can read the NCERT book online in these sections Solutions by Expert Teachers as per Central Board of Secondary Education (CBSE) Book guidelines. ASSEB Class 12 Economics Additional Question Answer are part of All Subject Solutions. Here we have given HS 2nd Year Economics Important Solutions English Medium for All Chapters, You can practice these here.

Problems of Deficient Demand and Excess Demand

Chapter: 4

PART – A: INTRODUCTORY MICROECONOMICS

IMPORTANT QUESTION AND ANSWER

Short Questions Answers:

1. What is deficient demand?

Ans: Deficient demand is when aggregate demand (AD) is less than the aggregate supply at full-employment output, creating a deflationary gap.

2. What is excess demand?

Ans: Excess demand is when current AD exceeds the AD needed for full employment, creating an inflationary gap.

3. What is a deflationary gap?

Ans: The shortfall of AD from the full-employment AD; it measures the amount of deficient demand.

4. What is an inflationary gap?

Ans: The excess of current AD over full-employment AD; it measures the amount of excess demand.

5. What is meant by under-employment equilibrium?

Ans: An equilibrium where output and employment are below full employment because AD is insufficient.

6. What is meant by over-full employment equilibrium?

Ans: Equilibrium at or beyond full employment where output can’t rise further, so prices rise.

7. Define GDP/output gap.

 Ans: The difference between actual GDP and potential GDP at full employment.

8. Name two main policy arms to correct demand gaps.

Ans: Fiscal policy and monetary policy.

9. Give one fiscal measure to correct deficient demand.

Ans: Increase government expenditure.

10. Give one fiscal measure to correct excess demand.

Ans: Increase tax rates or reduce government expenditure.

11. What happens to inventories under deficient demand?

Ans: Unplanned accumulation of inventories occurs, prompting firms to cut output.

12. How does bank rate policy help during deficient demand?

Ans: Lowering the bank rate reduces lending rates, stimulates investment, and raises AD.

13. How do CRR/SLR changes curb excess demand?

Ans: Raising CRR/SLR reduces banks’ lending capacity, cutting credit and AD.

14. What does “open market purchase” by the central bank do?

Ans: It injects money into the system, increases deposits and lending, and boosts AD.

15. What does moral suasion aim to do?

Ans: Influence banks’ lending behavior—either to encourage credit (in slump) or restrain it (in inflation).