1. Effect on General Price Level: Excess demand gives a rise to general price level because it arises when aggregate demand is more than aggregate supply at a full employment level. There is inflation in economy showing inflationary gap.
2. Effect on Output: Excess demand has no effect on the level of output. Economy is at full employment level and there is no idle capacity in the economy. Hence output can’t increase.
3. Effect on Employment: There will be no change in the level of employment also. The economy is already operating at full employment equilibrium, and hence there is no unemployment.
