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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).
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.
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CBSE Class 12 Economics past-paper question from the 2023board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.