--%>
Assignment Help - homework help

Correcting deflationary gap

Describe the role of given in correcting deflationary gap in an economy.

A) Govt. Expenditure
B) Legal Reserve Ratio

E

Expert

Verified

A) In a condition of deflationary gap or deficient demand. The Govt. must raise its expenditure that is, there will be much more economic activities in the economy such as building of roads, bridges, canal and so on. This will increase the level of exployment. This will in turn raise the income and the purchasing power. Therefore aggregate demand will increase.

B) Throughout deficient demand, central bank decreases the CRR. The outcome of reducing CRR will be view in the surplus cash reserves with the banks that can be offered for credit. The bank?s credit bank decreases SLR, this will have expansionary effect on credit position of the banks leading to rise in thier leading capacity borrowing increases and AD increases.

   Related Questions in Microeconomics

  • Q : Shutting down the average expected

    All firms will shut down when the average expected revenue by selling output fails to exceed expected: (w) average total cost. (x) marginal cost. (y) average fixed cost. (z) average variable costs. I need a good an

    		•
  • Q : Determine price elasticity of perfectly

    A city government trying to pass an excise tax for that the economic burden would be borne strictly through the seller will succeed when this imposes a tax on a good for that the price elasticity of: (i) demand is unitarily elastic. (

    		•
  • Q : Diminishing in demand problem When the

    When the equilibrium in the figure shown below move from point a to point b, a reduction in demand is experienced merely in the market illustrated in: (1) Panel A. (2) Panel B. (3) Panel C. (4) Panel D.

    Q : Preferential treatment of discrimination

    Programs that provide preferential treatment to members of groups which have previously suffered due to discrimination are termed as: (i) redistributive justice. (ii) affirmative action. (iii) compensating variations. (iv) equity considerations. (v) transfer programs.

    		•
  • Q : Optimization and Heuristics Can someone

    Can someone help me in finding out the right answer from the given options. No one can execute all the mental gymnastics essential to perfectly process information and hence all their decisions are mathematically optimal, therefore most of the people rely heavily on m

    		•
  • Q : Determine profit maximizing A

    A monopolist has an inverse demand curve given by p(y) = 12 - y and a cost curve given by c(y) = y2. (a) What will be its profi t maximizing level of output?

  • Q : Collapse of Cartels A purpose NOT often

    A purpose NOT often cited for the collapse of cartels would be: (w) price cheating. (x) inability to deter entry. (y) government prosecution. (z) merger into monopoly. Hey friends please give your opinion for the p

    		•
  • Q : Value of Marginal Product The social

    The social value of additional output from the additional units of labor is as: (1) Marginal revenue product [or MRP] of labor. (2) Wage rate or price of the labor. (3) Average revenue product [or ARP] of labor. (4) Value of marginal product [or VMP] of labor. (5) Mar

    		•
  • Q : Why production possibilities curve

    What is the reason that production possibilities curve concave? Elucidate.

    		•
  • Q : Changes in dollar receipts from sales

    The change within a firm’s dollar receipts from sales when this produces and sells one additional unit of output is termed as: (w) price. (x) marginal revenue. (y) average revenue. (z) contribution to overhead. Can anybody su

    		•