Is the equilibrium level of income also the full employment level of income ?
Answer:
Introduction:
The equilibrium level of income: it refers to the level of income where aggregate demand is equal to the aggregate supply.
The full-employment level of income: it refers to that level of income where aggregate demand is equal to the long-run aggregate supply where all the resources are fully utilized.
Explanation:
No, the equilibrium level of income is not always the full employment level of income. Equilibrium may be below full employment level and above full employment level as well. When the equilibrium is below full employment level it means that the resources are under-utilized. When the equilibrium is above full employment level it means that the resources are over-utilized.
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