Explain any two measures to remedy the problem of excess demand in an economy.

Explanation

Measure to control excess demand are:
(i) Decrease in government spending. In this fiscal measure, central government reduces its expenditure in order to decrease level of aggreagate demand.
(ii) Increase in government revenue. I.e.increase in taxes, increase in public debt, decrease in deficit financing.
(iii) Decrease in availability of credit. Central bank aims to reduce availability of credit through 'Monetary policy'.
It includes:
(a) Increase in bank rate.
(b) Sale of securities
(c ).Increase in lega reserve requirements(CRR& SLR).
Qualitative instruments:
(a) Increase in margin instrument
(b) Moral suasion (to discourage lending)
(c ).Selective credit controls (credit rationing).