Practicing Success

Target Exam

CUET

Subject

Economics

Chapter

Macro Economics: Determination of Income and Employment

Question:
Excess demand is a situation in which:
Options:

AD > AS at full employment level

AD < AS at full employment level

AD > AS at under employment level

AD < AS at under employment level

Correct Answer:

AD > AS at full employment level

Explanation:

Excess demand refers to the situation when aggregate demand is in excess of aggregate supply corresponding to full employment in the economy, i.e. AD > AS, corresponding to full employment

OR

When the actual level of aggregate demand is more than the required/planned level of aggregate demand to maintain full employment.