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Economics · 2022 · 5 marks
CBSE 2022 · Region 4 · Set 3 · Q12
Explain the concept of excess demand. How can government spending policy be helpful in correcting the situation of excess demand?
Explain the concept of excess demand. How can government spending policy be helpful in correcting the situation of excess demand ?
Marking-scheme solution
Excess demand refers to a situation when aggregate demand exceeds aggregate supply corresponding to full employment level of output in an economy.To correct excess demand, government should reduce its spending. It leads to fall in the income in the hands of public and consequently the purchasing power reduces. Thus, it will help to correct the situation of excess demand.
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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.