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Economics · 2025 · 4 marks
Determination of Income and EmploymentDetermination of Equilibrium Income in the Short Run4 marksUnderstandshort answer
CBSE 2025 · Region 7 · Set 3 · Q13
(a) “In an economy, ex-ante Aggregate Demand (AD) is more than ex-ante Aggregate Supply (AS).” Explain the likely impact of the given situation on…
(a)
“In an economy, ex-ante Aggregate Demand (AD) is more than ex-ante Aggregate Supply (AS).”
Explain the likely impact of the given situation on output, employment and income.
(b)
Define deficient demand
Marking-scheme solution
(a)
In an economy, if ex-ante Aggregate Demand (AD) is more than ex-ante Aggregate Supply (AS), it implies that households and firms are planning to consume more than what the firms expected them to consume. This will lead to an unintended fall in inventories. To bring back the inventory to the desired level, producers may plan to expand production. As a result, there may be an increase in the level of output, employment and income in the economy.
(b)
Deficient demand refers to a situation where Aggregate Demand (AD) falls short of Aggregate Supply (AS) corresponding to the full employment level of output.
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CBSE Class 12 Economics past-paper question from the 2025 board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.