Deficient Demand indicates __________________.

Under employment equilibrium

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Over Full employment equilibrium

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Full employment equilibrium

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None of these

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Solution

The correct option is A Under employment equilibrium
Deficient demand refers to the situation when aggregate demand is short of aggregate supply corresponding to full employment level in the economy. Aggregate supply being perfectly elastic, it converges with aggregate demand at a lower level of output lower than the full employment level of output in the economy. This is a situation of underemployment equilibrium.

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