Determination of Income and Employment — Economics STD 12 Commerce — Question
CBSE BoardEnglish MediumSTD 12 CommerceEconomicsDetermination of Income and Employment1 Mark
Question
What is excess demand in macroeconomics?
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Answer
When aggregate demand (AD) exceeds aggregate supply (AS) at full employment level of income, there is excess demand in the economy which leads to inflation. In other words, a situation of excess demand arises in an economy, when AD > AS at full employment level of income.
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