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in Class 12 by kratos

Discuss any two fiscal measures to correct a situation of deficient demand in an economy.

1 Answer

+1 vote
by kratos
 
Best answer

Increases in government expenditure : If the government expenditure is increased by an amount equal to the deflationary gap, it will restore the economy to the full employment equilibrium.

Reduction in the amount of taxes: The government can give tax concession to leave more disposable income in the hands of people. As a result, aggregate demand will increase.

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