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Deflationary gap is measured as :
ADF + ADU
ADF÷ ADU
ADF - ADU
None of these
- A deflationary gap occurs when aggregate demand (AD) is less than aggregate supply (AS) at full employment. It implies an underutilization of resources.
- ADF stands for Aggregate Demand at Full employment level.
- ADU signifies Aggregate Demand at the current (or actual) level.
- Option 1: ADF + ADU - This option suggests adding both values, which does not describe a deflationary gap.
- Option 2: ADF ÷ ADU - This implies division, not relevant to measuring a gap.
- Option 3: ADF - ADU - This calculates the gap by subtracting current aggregate demand from full employment aggregate demand.
- Option 4: None of these - Suggested if no options apply, but clearly option 3 is correct.
Your understanding highlights option 3: ADF - ADU as the correct one.
By: santosh ProfileResourcesReport error
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