Option 1 -> Aggregate demand refers to the total demand for goods and services in an economy, but doesn't describe a specific gap situation.
Option 2 -> Equilibrium demand is simply the demand at equilibrium point, not a situation describing output gaps.
Option 3 -> Excess demand occurs when aggregate demand exceeds the full employment output level, creating an inflationary gap.
Option 4 -> Deficient demand occurs when aggregate demand is insufficient to achieve full employment output, resulting in equilibrium below potential.
Hence, Deficient demand -> When aggregate demand is less than what is required to achieve full employment level of output, the economy experiences deficient demand or deflationary gap. In this situation, the equilibrium level of output settles below the full employment level, leading to unemployment and underutilization of resources. This gap represents the amount by which actual output falls short of potential output. -> correct