when s>i level of income and employment tends to shrink. State true or false and give reason
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1. Short-run According to JM Keynes, ‘A period of time during which level of output is determined exclusively by the level of employment in the economy, is termed as short-run.’
2. Equilibrium Output It refers to the level of output where the Aggregate Demand is equal to the Aggregate Supply (AD = AS) in an economy. It signifies that whatever the producers intend to produce during the year is exactly equal to what the buyers intend to buy during the year.
Where, AD = C + I (for a two-sector economy)
and AS = C + S
Where, AD = Aggregate Demand, AS = Aggregate Supply
C = Consumption, I = Investment, S = Saving
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