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

CBSE BoardEnglish MediumSTD 12 CommerceEconomicsDetermination of Income and Employment3 Marks
Question
What is meant by inflationary gap? State three measure to reduce it.
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Answer

'Inflationary Gap' is the situation when planned AD exceeds planned AS, corresponding to the level of full employment.
Three measures to reduce the inflationary gap are:
  • Decrease in the government spending.
  • Increase in the level of taxes.
  • Increase in the Bank Rate.

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