Determination of Income and Employment
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Would you advocate expansion or contraction of credit supply in a situation of excess demand?
or
What happens to an economy when credit availability is restricted and credit made costlier? 

Excess demand and credit supply
In a situation of excess demand, credit supply should be curtailed/contracted to control inflation. When credit availability is restricted and credit is made costlier, the state of excess demand in the economy is controlled to a great extent.
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    Explain the following:
    Meaning of deficient demand. 
    Answer
    Explain the following:
    Measures to rectify situation of deficient demand. 
    or
    Explain any one/two measures of reducing deflationary gap.
    or
    Explain roles of (a) open market operations, and (b) change in government expenditure in solving the problem of deficient demand. 
    or
    Explain role of 'bank rate' in correcting deficient demand.  
    Answer
    Explain a concept of deflationary gap with the help of a diagram.
    or
    Draw a diagram showing deflationary gap.
    Answer
    Distinguish between Classical Theory and Keynesian Theory of income and employment.
    Answer
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