✓ Board-verified
Economics · 2023 · 4 marks
Determination of Income and EmploymentDetermination of Equilibrium Income in the Short Run4 marksUnderstandshort answer
CBSE 2023 · Region 1 · Set 2 · Q13
Describe the adjustment mechanism if Aggregate Demand (AD) is less than Aggregate Supply (AS).
Describe the adjustment mechanism if Aggregate Demand (AD) is less than Aggregate Supply (AS).
Marking-scheme solution
When Aggregate Demand is less than Aggregate Supply, it means that households are planning to consume less than what the firms expect them to. This will lead to unintended rise in inventories. To restore the desired /intended level of inventories, producers may reduce production, As a result, there may be a decrease in the output, employment and income level of the economy.
All Determination of Income and Employment questions2023 question paperPractice Determination of Income and Employment →
More from Determination of Income and Employment
- At the break-even point level of incomes for the economy is ₹ 10,000 crores and if the people tends to save 20 per cent of their additional income,…2022
- Calculate the Equilibrium level of Income for an imaginary economy, if it is given that: Saving function, S = (–)500 + 0·2 Y where S = Savings, Y =…2022
- State and discuss any one component of Aggregate Demand in a two-sector economy.2022
- 'Investment multiplier and Marginal Propensity to Save are indirectly related to each other.' Explain with the help of numerical example.2022
- Assuming for a hypothetical economy, the following data is given: Income (Y) Consumption Investment (I) Aggregate Demand (AD) 0 20 20 40 100 100 20 –…2026
- “In an economy, ex-ante Aggregate Supply is more than ex-ante Aggregate Demand.” Explain its impact on the level of output, income and employment. OR…2024
- Identify which of the following equations is true. (Choose the correct alternative)2023
- Suppose in an economy, planned spendings are greater than planned outputs. Identify the correct option with respect to effects on the economy: (i)…2025
CBSE Class 12 Economics past-paper question from the 2023 board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.