What are the measures to correct deficient demand?

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Answer

Measure to Correct Deficient Demand! During the situation of deficient demand, the level of aggregate demand in the economy is less than the full employment level of output. It happens due to decrease in money supply and availability of credit. The measures adopted to control deficient demand are just the opposite of the measures used in excess demand.

Answer

To correct defeicient demand, means when the demand is less than supply, we have to increase c+I+g+(X-M).

1).CONSUMPTION EXPENDITURE.
2).PRIVATE EXPENDITURE.
3).GOVERNMENT EXPENDITURE.
4) EXPORTS- IMPORTS. ALL WE HAVE TO INCREASES TO CORRECT THE SITUATION OF DEFICIENT DEMAND.

THANK YOU!

Answer

Measures to Correct Deficient Demand:

To correct deficient demand, which occurs when the total demand for goods and services in an economy is insufficient to sustain full employment and production, several measures can be taken. These measures aim to stimulate spending and increase demand, thereby boosting economic activity. Below are some effective strategies that can be implemented:

1. Monetary Policy:
- Lowering interest rates: When central banks reduce interest rates, borrowing becomes cheaper, encouraging businesses and individuals to take loans and make investments.
- Quantitative easing: Central banks can implement quantitative easing by purchasing government bonds or other securities. This injects money into the economy, increasing liquidity and stimulating spending.

2. Fiscal Policy:
- Government spending: Increasing government expenditure on infrastructure projects, education, healthcare, or other public goods can create jobs, stimulate demand, and boost economic growth.
- Tax cuts: Reducing taxes for individuals and businesses can increase disposable income and incentivize consumption and investment.

3. Supply-side Policies:
- Enhancing productivity: Measures such as investing in technology, providing training programs, and improving infrastructure can boost productivity, leading to increased supply and potential economic growth.
- Reducing regulations: Streamlining regulations and reducing bureaucratic hurdles can encourage businesses to expand and invest, resulting in increased output and employment.

4. Exchange Rate Policy:
- Depreciation: A deliberate depreciation of the national currency can make exports more competitive, leading to increased demand for domestic goods and services from foreign markets. This can help correct a deficient demand in the domestic economy.

5. Income Redistribution:
- Social welfare programs: Expanding social safety nets, providing income support, and improving access to basic necessities can help increase the purchasing power of lower-income households, thereby boosting demand.

6. Confidence-Building Measures:
- Communication: Governments and central banks can use effective communication strategies to assure businesses and consumers about the stability and future prospects of the economy. This can help build confidence and encourage spending and investment.

7. International Cooperation:
- Coordination: International cooperation can be beneficial in addressing global deficient demand. Coordinated efforts among countries, such as fiscal stimulus packages or trade agreements, can boost demand and promote economic recovery on a global scale.

By implementing these measures, governments and policymakers can address deficient demand and stimulate economic growth, leading to improved employment opportunities and overall prosperity.

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