The equilibrium level of output may be more or less than the full employment level of output. If it is less than the full employment of output, it is due to the fact that demand is not enough to employ all factors of production. This situation is called _____.

Deficient demand.

The correct answer is Option (3) → Deficient demand.

When the equilibrium level of output in the economy is less than the full employment level, it means that aggregate demand (AD) is insufficient to buy all the goods and services that could be produced using full employment of resources. This shortfall in demand causes unemployment and underutilization of resources. Such a situation is called deficient demand.