Question

Write the meaning of excess demand.

Hint:

Excess demand can result in inflation as businesses may raise prices to match the high demand.

Answer 1

Step 1: Understanding Excess Demand.
Excess demand occurs when the demand for goods and services in the economy exceeds the supply at the current price level. This often leads to inflationary pressures in the economy.

Step 2: Conclusion.
Excess demand signifies an imbalance where consumers wish to buy more than what is available, which can push prices higher in the economy.