'Excess demand creates greater opportunities of employment in the economy.' Defend or refute the given statement with valid explanation.

Question

Accepted Answer

**Refute the statement.**

Excess demand does NOT create greater opportunities of employment. When aggregate demand exceeds aggregate supply at full employment level, the economy cannot produce more output because all resources are already fully utilized. The excess demand only leads to rise in general price level (inflation), without any increase in real output or employment. Employment opportunities increase only when there is deficient demand and the government takes corrective measures to boost aggregate demand.