ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -According to the Keynesian theory, the equilibrium level of income in an economy is determined at the intersection point of AD and AS curves. Aggregate demand means the total demand for final goods in an economy. The AD curve has a positive slope, which means that when income increases, AD (expenditure) also increases.

Detailed explanation-2: -The equilibrium level on income may be determined at a level less than full employment where the market is clear even in under utilization of resources, more than the full employment where market is clear even if resources are over utilized or equal to level of full employment.

Detailed explanation-3: -In the classical model, equilibrium level of output is determined by the employment of labour. The level of output and, hence, the level of employment is established in the labour market by the demand for and supply of labour. where W is the money wage, P is the absolute price level, and W/P is the real wage.

Detailed explanation-4: -The equilibrium level of income is the point at which a business is able to sell all of the goods it planned to. Pretty simple. The company produces its product to that level, and then sells exactly the same amount. The company’s output–its production–is equal to the consumer demand to buy the product.