MEASURES TO CORRECT DEFICIENT AND EXCESS

DEMAND
 The stability of the economy requires that the situation
of excess demand or deficient demand is corrected. Following
are some of the well accepted measures to correct deficient or
excess demand:
1 Fiscal Policy
2 Monetary Policy
3 Foreign Trade Policy
1. FISCAL POLICY:
According to Prof. Dalton, “Fiscal policy is the policy
concerning the revenue, expenditure and debt of the government
for achieving definite objectives.”

INSTRUMENTS OF FISCAL POLICY

FISCAL POLICY

Public or govt. expenditure Financing of govt. expenditure or

govt. revenue

Public works Taxes

Public welfare Public Debt or borrowing

Defence Deficit Financing

Subsidies
2. MONETARY POLICY
According to D.C.Aston “Monetary policy involves the
influence on the level and composition of aggregate demand by
the manipulation of interest rate and availability of credit.”

INSTRUMENTS OF MONETARY POLICY

MONETARY POLICY

Quantitative Qualitative

Bank Rate Change in Margin

Requirement of Loan

Open Market Operations Rationing of Credit

Change in minimum Reserve Direct Action

Ratio

Change in Liquidity Ratio Moral Pressure

Foreign trade policy refers to

that policy which controls foreign
3. trade
FOREIGN TRADE
to achieve POLICY
given objectives
INSTRUMENTS OF FOREIGN TRADE POLICY

FOREIGN TRADE POLICY

Exports surplus Import surplus