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Economics

Measures to correct excess/deficient demand - Government spending

In Class 12 Economics, this topic from “Determination of Income and Employment” explains how government spending can correct excess demand and deficient demand. Students learn why reducing public expenditure can control inflationary pressure when aggregate demand is too high, while increasing expenditure can raise demand, output, income and employment during a demand shortage. The topic also connects government expenditure with fiscal policy, the multiplier effect and macroeconomic stability.

Easy · Level 1 · 1 questions

Practice questions

01Why is government expenditure studied in macroeconomics?

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