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Explain how the equilibriumlevel of income can be attained in an economy if, AggregateDemand is more than the Aggregate Supply. |
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Answer» SOLUTION :Equilibriumlevel of Income refers to that level of output where Aggregate demandis equalto theAggregate supply . If Aggregate Demand exceeds Aggregate Supply, it means buyers are PLANNING to buy more goods and servicesthan producers are planning to produce.Thus,theinventories in hand with theproducerswill START falling. As a result,producers will plan to RAISE theproduction.This will INCREASE the level of income upto the level Aggregate Demand is equal toAggregate Supply. |
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