Question

The amount by which actual aggregate expenditure falls short of aggregate output corresponding to full employment level in the economy is known as ______.

Options

• deficient demand

• deflationary gap

• both (a) and (b)

• none of these

Answer 1

The amount by which actual aggregate expenditure falls short of aggregate output corresponding to full employment level in the economy is known as deficient demand and deflationary gap.

Explanation:

When aggregate expenditure is less than the full employment output, it results in deficient demand or a deflationary gap. This leads to unemployment and underutilization of resources in the economy.