Question

how is output equal to income in Income Determination

Answer 1

Explanation:

In the short run, the level of national income is determined by aggregate demand and aggregate supply. The supply of goods and services in a country depends on the production capacity of the community. But during the short period the productive capacity does not change.

If AD increases, output will also increase and the level of national output (i.e., national income) will rise. On the other hand, if AD decreases, the national output or national income will also decrease. It follows that the equilibrium level of NI is determined by AD since the aggregate capacity remains more or less the same during the short run.

Thus, there are two components of effective demand:

Answer 2

Answer:

equals the total income generated in an economy by the production of final goods and services during a particular period. It is a flow variable. Because an economy's total output equals the total income generated in producing that output, GDP = GDI.