explain the significance of export promotion in correcting the situation of deflationary gap in the economy.
( 6 marks )

Dear Student,
Deflationary gap is the amount by which actual aggregate demand falls short of actual aggregate supply at full level of employment.
It is the difference between potential output at full level employment and actual output.It is also known as negative output gap.
Significance of Export promotion in correcting Deflationary gap:

1. Inflow of foreign exchange will lead to expansion of market which can be used to facilitate development.
2. Export promotion leads to greater utilisation of resources, it prevents usage of locally available resources.
3. Wide foreign market leads enables the producers to fully utilize the existing plant capacity and take advantage of large scale production to reduce production costs.
4. Export Industries are subject to greater competition they always strive to produce high quality of products and greater efficiency in production which increases competitiveness in domestic as well as foreign markets.

Hope it helps.
Regards,