What are the determinants of National Income? How is equilibrium level of National income determined?
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In other words, an equilibrium level of national income is determined at that point where aggregate demand (C + I) equals aggregate supply (i.e., the country's aggregate output or national income).
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According to Keynesian model, the equilibrium level of national income is determined at a point where the aggregate demand curve intersects the aggregate supply curve. The 45° helping line represents aggregate supply. By definition, output equals income on each point of aggregate supply curve.
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