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Economics · 2022 · 3 marks
CBSE 2022 · Region 2 · Set 2 · Q10
Define Deflationary Gap. State, how the government can control the situation of deflationary gap, using the taxation policy.
Define Deflationary Gap. State, how the government can control the situation of deflationary gap, using the taxation policy.
Marking-scheme solution
Deflationary gap refers to the situation when Aggregate Demand falls short of Aggregate Supply, corresponding to the full employment level of output.Control through taxation policy:
The government may decrease the existing tax rates.
Lower taxes increase the disposable income in the hands of the general public.
This helps to manage the deflationary situation in the economy.
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CBSE Class 12 Economics past-paper question from the 2022 board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.