CLASS 12 MACROECONOMICS UNIT-3: DETERMINATION OF INCOME & EMPLOYMENT- BEST IMPORTANT NOTES
UNIT-3: DETERMINATION OF INCOME & EMPLOYMENT Introduction: In any Macroeconomic model the equilibrium level of income, employment and output for any economy is determined by the interaction of Aggregate Demand and Aggregate Supply. Hence it is important to discuss the behavior of aggregate demand and aggregate supply before discussing how equilibrium level of income, employment and output is determined in any economy. Aggregate demand Meaning : Aggregate demand refers to the total demand for final goods and services in the economy. Alternatively, it is the total expenditure which the community intends to incur on purchase of goods and services. Thus, aggregate demand is synonymous with aggregate expenditure in the economy. Components of Aggregate Demand: The main components of aggregate demand (aggregate expenditure) in a four sector economy are: 1. Household (or private) consumption Expenditure (C) 2. Private investment Expenditure (I) 3. Government demand for goods and services/...