Question

Deflationary Gap refers to the gap by which ______ falls short of the Aggregate Demand required to establish full employment equilibrium.

Options

• ex-ante aggregate demand

• ex-post aggregate demand

• ex-ante aggregate supply

• ex-post aggregate supply

Answer 1

Deflationary Gap refers to the gap by which ex-post aggregate demand falls short of the Aggregate Demand required to establish full employment equilibrium.

Explanation:

The economy’s total expenditure is insufficient to purchase the output produced at full employment, resulting in unemployment and unused capacity. As a result, it signifies a state of insufficient demand in the economy.