11. A) Explain the meaning of equilibrium level of income. Can there be
unemployment in the economy at equilibrium level of income? Explain.
B) Given saving curve, derive the consumption curve and state the steps in
) ,
doing so. Use diagram.
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- The equilibrium level of income refers to when an economy or business has an equal amount of production and market demand. ... The equilibrium level of income is the point at which a business is able to sell all of the goods it planned to
- Yes an economy can be in equilibrium when there is unemployment in the economy when the aggregate demand= aggregate supply in the economy. It refers to a situation when aggregate demand is equal to the aggregate supply at a level where the resources are not fully employed.
- Steps taken for derivation of consumption curve are: (i) At zero level of income, the savings are O\overline{S} which is the amount of autonomous consumption at Y= 0. So, -O\overline{S} = O\overline{C}. Hence, the consumption will start from the point \overline{C}.
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