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Determination of Income and Employment — Economics STD 12 Humanities & Commerce — Question

Rajasthan BoardEnglish MediumSTD 12 Humanities & CommerceEconomicsDetermination of Income and Employment3 Marks
Question
Explain briefly how changes in open market operations be helpful in correcting deficient demand.
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Answer

Open market operations. For controlling deficient demand, the central bank should resort to buying of government securities. By buying government securities, the central bank injects the additional purchasing power into the system which results in the expansion of credit. As a result, aggregate demand increases and the problem of deficient demand can be solved.

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