Deficient demand is said to exist in the economy when-

The correct answer is Option (4) → Aggregate demand falls short of aggregate supply at full employment.

Deficient demand refers to a situation where aggregate demand (AD) is less than aggregate supply (AS) corresponding to full employment in the economy.

• When AD < AS at full employment, not all goods produced are sold.

• This leads to unsold inventories, falling output, and unemployment — symptoms of deflationary pressure.

Hence, deficient demand exists when aggregate demand falls short of aggregate supply at full employment.