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Economics · 2022 · 3 marks
CBSE 2022 · Region 5 · Set 1 · Q8
"The Government has raised the exemption limit for the payment of Income tax from ₹ 2 lakh to ₹ 2.5 lakh." If the situation of deficient demand is…
"The Government has raised the exemption limit for the payment of Income tax from ₹ $\displaystyle 2$ lakh to ₹ $\displaystyle 2.5$ lakh."
If the situation of deficient demand is prevailing in the economy, what will be the impact of this action taken by the Government ?
Marking-scheme solution
In the given situation of deficient demand, an increase in the exemption limit by the Government would lead to decrease in the tax burden on the households, resulting an increase in disposable income.Thus, Aggregate Demand (AD) will increase and deficient demand will be managed accordingly.
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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.