Practicing Success

Target Exam

CUET

Subject

Economics

Chapter

Macro Economics: Determination of Income and Employment

Question:

Deficient demand leads to _____________ and can be corrected through _________

Which of the following options suits best in the above blank?

Options:

Inflationary gap, fiscal policy

Deflationary gap, fiscal policy

No gap, monetary policy

Deflationary gap, fiscal and monetary policy

Correct Answer:

Deflationary gap, fiscal and monetary policy

Explanation:

Deficient demand means supply is more as compare to demand. This leads to producers lowering the prices of their goods in order to sell them. This leads to deflationary gap. Deficient demand can be corrected through both – monetary and fiscal policies.