Deficient demand exists when aggregate demand for a level of output is less than full employment level. In other words, deficient demand exists when aggregate demand falls short of aggregate supply at full employment level. It is a level of demand which is insufficient to eliminate involuntary unemployment. Deficient demand gives rise to a deflationary gap.
Role Of Bank Rate in removing it :- Bank rate is the rate of interest at which the central bank of a country gives credit to commercial banks. For controlling deficient demand, the central bank should decrease the bank rate. A decrease in bank rate reduces the market rate of interest as a result credit becomes cheap. Accordingly, the demand for credit increases and aggregate demand is increased and the problem of deficient demand can be solved.
