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How aggregate supply equal to national income?
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How aggregate supply equal to national income?
Aggregate Supply and National Income are equal to each other by virtue of their similar definitions.Aggregate Supply by definition is the money value of the total amount of output that an economy plans to produce during the given period of time.National Income (or GDP) is similarly by definition, the value of the total amount of output (goods and services) produced in an economy during the given period of time - according to the production method.Now, National Income may also be defined as the sum of the factor income earned by all residents in an economy - by the Income method.However it must be noted that because of the circular flow of income in economy, the value of total output = value of total income earned. Therefore National Income can be expressedboth as the sum of income as well as the sum of value of output produced, because it is the production of output that generates income to the factors of production.The confusion arises when we think that AS indicates the value of output produced but National Income refers to the value of total income earned. But since National Income itself is equal to the sum value of output produced, there's no difference between AS and NY.Therefore, both Aggregate Supply and National Income mean the same thing - total amount of output produced during a given time.Hope u've understood
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How aggregate supply equal to national income?
Aggregate supply means the total money value of goods and services produced in an economy in a year.They are (i) the supply of consumer goods and services in a year, (ii) the supply of capital goods or investment goods as they help in producing further goods. Aggregate supply is the same thing as national product. The money value of national product of goods and services is distributed among the various FACTORS OF PRODUCTION as wage, rent interest and profits as rewards for the contribution of factors to the national product. The aggregate of wages, rent, interest and profit is called national income.
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How aggregate supply equal to national income?
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