Question

Which of the following statements is not correct with respect to correction of excess demand?

Options

• Increase in taxes

• Increase in Repo Rate

• Increase in imports

• Increase in government spending

Answer 1

Increase in government spending

Explanation:

Excess demand must be reduced, so government spending should be cut. Higher taxes, a higher repo rate and more imports all reduce demand or increase supply, so they are correct corrective measures.