If the level of effective demand is much below the level of full employment equilibrium then which situation will appear in the economy ?
If the level of effective demand is much below the level of full employment equilibrium then which situation will appear in the economy ?
Solution
✅ Correct Option: 2
When the level of effective demand is below the full employment level, the economy settles at equilibrium with unemployed resources. This is called under employment equilibrium (equilibrium exists, but not at full employment level of output).
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