Question

how equilibrium national income is determined when the economy reaches full employment

Answer 1

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In short, it is the interaction of the buyers and producers of all output that determines both the national income (real GDP) and the price level. ... If the current output is equal to the full employment output, then we say that the economy is in long-run equilibrium.

Answer 2

The equilibrium of national income is reached when the total aggregate supply is equal to aggregate demand. When the economy is at full employment it means that the available labour is being fully utilized. If the economy that moves above its ‘full-employment equilibrium’ that means that it is producing goods and services at a ‘higher rate’ than its potential.

Explanation:

• The equilibrium of national income is achieved when the entire labour force is utilized and it reaches its full employment level.

• But there are many factors that can result in pushing the economy beyond its full employment levels.  

• When full employment level is reached the total output is at the maximum with the ‘highest level of production’.

Learn more about national income

With a rise in real national income, welfare of the people

a.rises

b.falls

c.reamins unchanged

d. none of rhe above

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