write the impacts or effects of excess demand?
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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. Effect on Output: Excess demand has no effect on the level of output.
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Excess demand on output, employment and prices causes inflation in an economy. Inflation refers to the rise in general level of prices in an economy. Inflationary gap refers to the excess of aggregate demand over and above its level required to maintain full employment equilibrium in the economy.
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. Effect on Output: Excess demand has no effect on the level of output.
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