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Economics

Measures to correct excess/deficient demand - Money supply

In Class 12 Economics, this topic from “Determination of Income and Employment” explains how changes in money supply can correct excess or deficient demand. Students learn how the central bank can reduce money supply during excess demand and inflationary pressure by selling securities, raising the bank or repo rate, and increasing reserve requirements. During deficient demand, it can increase liquidity through security purchases, lower interest rates, and reduced reserve requirements. The topic connects monetary policy with credit, aggregate demand, income, and employment.

Hard · Level 1 · 1 questions

TOPIC PRACTICE

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  1. By changing government spending and tax rates
  2. Through interest rates and the availability of credit
  3. By changing consumers’ personal tastes
  4. By setting the prices of every product directly

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