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Equilibrium Income Determination - Economic Trends, Business Environment Video Lecture | Business Environment - B Com
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FAQs on Equilibrium Income Determination - Economic Trends, Business Environment Video Lecture - Business Environment - B Com
| 1. What is equilibrium income determination? |  |
Ans. Equilibrium income determination refers to the process of determining the level of national income or output at which aggregate demand (total spending) equals aggregate supply (total production) in an economy. It is the level of income where there are no unplanned changes in inventories, which ensures a stable economic equilibrium.
| 2. What are economic trends and how do they influence equilibrium income determination? | |
Ans. Economic trends are long-term patterns or movements in the overall performance of an economy. These trends, such as changes in consumer spending, investment, government policies, or technological advancements, can significantly influence equilibrium income determination. For example, if there is an increase in investment or government spending, it will boost aggregate demand, leading to a higher equilibrium income level.
| 3. How does the business environment affect equilibrium income determination? | |
Ans. The business environment, including factors like market conditions, competition, and government regulations, can impact equilibrium income determination. A favorable business environment with increased consumer confidence, low barriers to entry, and supportive government policies can stimulate economic growth, leading to a higher equilibrium income level. Conversely, an unfavorable business environment may hinder investment and consumer spending, resulting in a lower equilibrium income level.
| 4. What is the role of consumption in determining equilibrium income? | |
Ans. Consumption plays a crucial role in determining equilibrium income. It refers to the spending by households on goods and services. The level of consumption depends on various factors such as disposable income, consumer confidence, and interest rates. Higher consumption leads to an increase in aggregate demand, which raises the equilibrium income level. Conversely, lower consumption can lead to a decrease in equilibrium income.
| 5. How do government policies impact equilibrium income determination? | |
Ans. Government policies can have a significant impact on equilibrium income determination. Expansionary fiscal policies, such as increased government spending or tax cuts, can stimulate aggregate demand, leading to a higher equilibrium income level. On the other hand, contractionary fiscal policies, such as reduced government spending or higher taxes, can decrease aggregate demand, resulting in a lower equilibrium income level. Government policies also influence factors like investment, consumption, and business confidence, which further affect equilibrium income.
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Nov 16, 2024 Last updated |
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