Page 1 - Lesson Note 46 (1)

SAI INTERNATIONAL SCHOOL

ECONOMICS

Class-XII

CHAPTER 9

Excess Demand and Deficient Demand

(Module- 46)

TOPICS TO BE COVERED-

-Meaning of Excess demand and concept of inflationary Gap

- Reasons for excess demand

-Impact of excess demand on employment, output and general price level

- Meaning of Deficient demand and concept of deflationary Gap

- Reasons for Deficient demand

-Impact of deficient demand on employment, output and general price level

Meaning of Excess demand and concept of inflationary Gap: -

Excess demand refers to the situation when aggregate demand is in
excess of aggregate supply corresponding to full employment in the economy. It
is the excess of anticipated expenditure over the value of full employment
output.

Excess demand gives rise to an inflationary gap. Inflationary gap refers to
the gap by which actual aggregate demand exceeds the aggregate demand
required to establish full employment equilibrium.