Determination of Equilibrium Income and Employment
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As a result of aggregate demand being greater than aggregate supply theMarks:1
national income will increase.
Explanation:When aggregate demand is greater than aggregate supply, the national income will increase leading to inflationary gap.
National income is at its equilibrium whenMarks:1
aggregate demand and supply are equal.
Explanation:Equilibrium literally means the state of balance. The national income is at equilibrium when aggregate demand is equal to aggregate supply.
Say's law of market states thatMarks:1
supply creates its own demand.
Explanation:When the supply is greater than the demand then automatically demand is created. Thus, supply creates its own demand.
Increased unemployment and less motivation at work would shift aggregateMarks:1
supply to the left.
Explanation:Increased unemployment benefits and less motivation to work, leads to less people working and reduced aggregate supply.
Increased levels of spending on imports will shift aggregateMarks:1
demand to the left.
Explanation:Increased levels of spending on imports, leads to less spending domestically and reduces domestic demand.