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Economics · 2025 · 4 marks
CBSE 2025 · Region 5 · Set 1 · Q15
Read the following text carefully: In an economy, a significant reduction in Aggregate demand raised concerns about future growth prospects of the…
Read the following text carefully :In an economy, a significant reduction in Aggregate demand raised concerns about future growth prospects of the country. This economic downturn underscores the urgent need for strategic measures to boost confidence of households and stimulate economic activities.Based on the above text and common understanding, explain the measures which the government may take to stabilise the indicated situation.
Marking-scheme solution
The highlighted issue is deflation. To control deflation, the government may:
decrease the tax rates which may increase the disposable income (purchasing power) in the hands of the general public. Consequently, it may lead to a rise in Aggregate Demand, thereby correcting the situation of deflation.
increase the public expenditure which may increase the level of income in the economy. Consequently, it may lead to a rise in Aggregate Demand, thereby correcting the situation of deflation.
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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.