how does equilibrium level of income is dertermined? which factors do change in national income? answer in 250 words
Answers
Answered by
14
In other words, effective demand is that level of aggregate demand (aggregate expenditure) which becomes effective in determining equilibrium level of income because it is equal to aggregate supply of output. ... Thus, the level of national income is determined by and equal to effective demand.
Most simply, the formula for the equilibrium level of income is when aggregate supply (AS) is equal to aggregate demand (AD), where AS = AD. Adding a little complexity, the formula becomes Y = C + I + G, where Y is aggregate income, C is consumption, I is investment expenditure, and G is government expenditure.
Similar questions