Question : Which of the following statement are true?
- The deflationary gap can be corrected by raising the level of aggregate demand.
- Equilibrium beyond full employment is better than equilibrium at full employment.
Option 1: Both are true.
Option 2: Both are false.
Option 3: Statement 1 is true, statement 2 is false.
Option 4: Statement 1 is false, statement 2 is true.
Answer (1)
10th Jan, 2024
Correct Answer:
Statement 1 is true, statement 2 is false.
Solution :
Deflationary gap occurs when aggregate demand falls short of aggregate supply.
Full employment equilibrium output is the maximum output. So output remains constant even beyond full employment level.
Hence, Option C is correct.
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