wat causes changes in equilibrium level of income
Answers
In Macroeconomics,equilibrium level of income is contingent on various components of Aggregate Demand(AD) and Aggregate Supply(AS) and any fluctuations in these determining components would lead to a change in equilibrium income level in any economy.
Explanation:
The equilibrium income level is established in the goods market when the components of AS are identical or equivalent to the various determinants of AD.In an open economy,the major determinants or attributes of AD include aggregate or overall consumption level in the economy,aggregate investment level,overall government expenditure or spending and the total net export contingent on the overall export and import level in the economy.The major components of AS basically include various factors which affect the overall production and supply of goods and services in the economy.Therefore,any shift or fluctuations in these determinants or components will consequently cause a change in the equilibrium level of income in the economy.For example,any potential change in aggregate consumption expenditure by the consumers,planned or actual capital investment by businesses and companies,increase or decrease in the government expenditure or changes in the net export reflected by modifications in the export or import level of the country will directly affect the AD which will sequentially impact the equilibrium income level through shift or fluctuations in AD.Similarly,any fluctuations in the supply side factors or attributes in the country will cause a shift or change in AS which will further lead changes in equilibrium income level in the economy.