Describe the fiscal measures to accurate the condition of deficient demand and excess demand.
Answer: Fiscal measures are the government’s budgetary policy that comprises taxation and government expenses policy.
Deficient Demand:
A) Govt. Expenditure: Government will raise expenditure. This will rise AD to restore full employment level.
B) Taxes: Government will reduce taxes. This will raise disposable income. AD will also increase.
Excess Demand:
A) Govt. Expenditure: Govt. will reduce its expenditure. Therefore AD will reduce.
B) Taxes: Government must increase taxes. This will decrease the disposable income of the household and aggregate demand will reduce.