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Equilibrium GDP, Macroeconomics Video Lecture | Macro Economics - B Com

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FAQs on Equilibrium GDP, Macroeconomics Video Lecture - Macro Economics - B Com

1. What is equilibrium GDP in macroeconomics?
Ans. Equilibrium GDP refers to the level of gross domestic product (GDP) at which aggregate demand (total spending) in the economy equals aggregate supply (total output) in the economy. It represents a state of balance in the economy where there is no tendency for GDP to either increase or decrease.
2. How is equilibrium GDP determined in macroeconomics?
Ans. Equilibrium GDP is determined by the intersection of aggregate demand (AD) and aggregate supply (AS) curves. At this point, the quantity of goods and services demanded by households, businesses, and the government is equal to the quantity of goods and services supplied by firms. This equilibrium level of GDP can be measured using various methods, including the expenditure approach, income approach, or production approach.
3. What factors can cause a shift in equilibrium GDP?
Ans. Several factors can cause a shift in equilibrium GDP, including changes in consumption, investment, government spending, or net exports. For example, an increase in consumer confidence and spending would shift the aggregate demand curve to the right, leading to a higher equilibrium GDP. Similarly, an increase in government spending or a decrease in taxes can also shift the aggregate demand curve and impact the equilibrium GDP.
4. Can equilibrium GDP be below full employment GDP?
Ans. Yes, equilibrium GDP can be below full employment GDP. Full employment GDP refers to the level of output where all available resources, including labor, are fully utilized. If the equilibrium GDP is below this level, it indicates that there is an economic downturn or a recession, with unemployment prevailing in the economy.
5. How does the government intervene to achieve equilibrium GDP?
Ans. The government can intervene in the economy through fiscal and monetary policies to achieve equilibrium GDP. Fiscal policy involves changes in government spending and taxation to influence aggregate demand. For example, during a recession, the government can increase spending or decrease taxes to stimulate demand and raise equilibrium GDP. Monetary policy, on the other hand, involves actions by the central bank to control the money supply and interest rates, which can also impact aggregate demand and equilibrium GDP.
59 videos|61 docs|29 tests
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