ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Aggregate Supply (AS) an National Income (Y), are one and same thing. The major portion of national income is spent on consumption of goods and services and the balance is saved. It means, Income (Y) is either consumed or saved. The aggregate supply curve and national income curve coincide with each other.

Detailed explanation-2: -Answer and Explanation: Aggregate demand and aggregates supply are equal to national income in equilibrium. Aggregate demand indicates the total amount of goods and services demand at different prices, while aggregate supply indicates the aggregate quantity of goods and services supplied.

Detailed explanation-3: -National income refers to the amount of total goods and services produced in the economy. And in Circular Flow of income we have studied that production phase and income phase (Generation phase and Distribution phase) are equal. So in this way we can say that national income is equal to Aggregate supply.

Detailed explanation-4: -Aggregate Supply (as): It refers to the movement of goods and services in the economy. AS is nothing more than national income because the money value of final goods and services equals net value-added.

Detailed explanation-5: -To clear the unwanted increase in inventory, firms plan to reduce the production output till Aggregate demand becomes equal to Aggregate supply. Therefore, level of national income reduces to the level og aggregate demand. Was this answer helpful?