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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 1 · Q13
Describe the adjustment mechanism, if ex-ante savings are less than ex-ante investments.
Describe the adjustment mechanism, if ex-ante savings are less than ex-ante investments.
Marking-scheme solution
If ex-ante savings are less than ex-ante investments, it means that the buyers are intending to buy more than what the producers are intending to produce.
Thus, the inventories will fall below the desired level.
To restore the desired level of inventories, producers may intend to increase output and employment in the economy.
This mechanism will continue till the equilibrium is reinstated.
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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.