Macro Economics Analysis : dntjnv@yahoo.co.in Macro Economics Analysis By :-
D.N.Tiwari
PGT(Eco)
JNV Bahraich UP
Slide 2 : dntjnv@yahoo.co.in PROJECT WORK ON MACRO ECONOMICS TOPIC- EXCESS DEMAND
: dntjnv@yahoo.co.in PRESENTED BY D N TIWARI. PGT(ECO) J. N. V. BAHRAICH UP INDIA. And BA(HONS),MA(ECO),LL.B,MGA CAREER COUNSEELOR
Slide 4 : dntjnv@yahoo.co.in Meaning of excess demand
Causes of excess demand .
Effects of excess demand .
Measures to control excess demand .
Question answer session .
Topic related questions .
Acknowledgement . CONTENTS
Slide 5 : dntjnv@yahoo.co.in Students will get knowledge about excess demand .
They will know about causes and effects of excess demand .
They will get knowledge about how to control excess demand . OBJECTIVES
Slide 6 : dntjnv@yahoo.co.in Excess demand is a situation in the economy where aggregate demand is more than aggregate supply at full employment level .
It is a situation in the economy where planned aggregate expenditure is more than availability of output at full employment level . MEANING OF EXCESS DEMAND
Slide 7 : dntjnv@yahoo.co.in Due to increase in money supply .
Due to increase in propensity to consume
If autonomous investment increases without corresponding increase in saving .
Due to increase in demand for export goods .
If production for defence goods increases instead of consumption goods . CAUSES OF EXCESS DEMAND
Slide 8 : dntjnv@yahoo.co.in Production can not be increased because full employment level has already achieved .
Increase in price level in the economy .
Real national income does not increase , only money national income increases . EFFECTS OF EXCESS DEMAND
Slide 9 : dntjnv@yahoo.co.in EMPLOYMENT / INCOME AGG. EXPENDITURE O X Y AS AD AD 1 E E N OVER FULL EMPLOYMENT EQUILIBRIUM FULL EMPLOYMENT EQUILIBRIUM EXCESS DEMAND DIAGRAMMATICAL PRESENTATION
Slide 10 : Following measures are taken to control excess demand
Fiscal Policy .
Monetary Policy
Other policies MEASURES TO CHECK EXCESS DEMAND
Fiscal policy to control excess demand : dntjnv@yahoo.co.in Fiscal policy to control excess demand Government to impose more taxes specially on rich people
Government should cut it’s expenditure on public works.
Deficit financing should be restricted
More public borrowing should be made to withdraw purchasing power from the people.
Slide 12 : dntjnv@yahoo.co.in Bank rate: In a situation of excess demand , the central bank should raise the bank rate. Increase in bank rate will automatically lead to increase in banks lending rates to their borrowers. This in turn will reduce the volume of bank loans and advances. MONETARY POLICY TO CONTROL EXCESS DEMAND
Slide 13 : dntjnv@yahoo.co.in In the times of excess demand central bank sales govt. securities to commercial banks or to their customers . This will reduce the cash reserves with the banks directly and indirectly there by affecting their capacity to make loans .Thus ,credit contracts and demand declines . OPEN MARKET OPERATION
Slide 14 : dntjnv@yahoo.co.in To control excess demand central bank can increase cash reserve ratio and there by cash resources of the banks can be reduced .This will force the commercial banks to contract credit . CASH RESERVE RATIO .
Slide 15 : dntjnv@yahoo.co.in 1 . Enlarged import surplus .
2 .Avoidance of wage increase .
3 .Increase in output . OTHER MEASURES
Slide 16 : At the time of excess demand , import should be surplus .It means import should be more than export . Due to increase in import and decrease in export ,excess demand will be reduced . ENLARGED IMPORT SURPLUS
Slide 17 : dntjnv@yahoo.co.in In the situation of excess demand wage increase without improvement in productivity must be avoided . AVOIDANCE OF WAGE INCREASE .
. : dntjnv@yahoo.co.in . Fiscal Policy –Govt. policy related to its income, expenditure and borrowing .
Monetary Policy – It is the policy of central bank related to control of money supply and credit .
Bank Rate –It is the rate at which central bank lends money to its member banks . MEANING OF KEY CONCEPTS
. : dntjnv@yahoo.co.in . Cash Reserve Ratio –Commercial banks are required under law to keep with central bank a minimum percentage of their deposits as cash reserve .
Enlarged import surplus –Excess of imports over exports . MEANING OF KEY CONCEPTS (CNTD) .
Slide 20 : dntjnv@yahoo.co.in Define excess demand .
Define bank rate .
What are the causes of excess demand ?
Explain any two monetary measures to control excess demand .
Explain fiscal measures to curb excess demand ASSIGNMENT
Slide 21 : dntjnv@yahoo.co.in I Thank You