Determination Of Income And Employment — Flashcards
ICSE · Class 12 · Economics
38 flashcards for Determination Of Income And Employment (ICSE Class 12 Economics) to test yourself on key terms and facts.
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What is aggregate demand?
Answer
Aggregate demand (AD) is the total value of final goods and services demanded in an economy during a year. It also means the total expected receipts from the sale of output during a year. In a two-sec…
What are the main components of aggregate demand in a full economy?
Answer
In a full economy, aggregate demand has four components: consumption demand (C), private investment demand (I), government demand for goods and services (G), and net exports (X-M).
Why is investment treated as autonomous in aggregate demand analysis?
Answer
Investment is assumed to be independent of income and constant at all levels of income in the short run. Because of this, the investment curve is horizontal and the AD curve lies above the consumption…
Why does the aggregate demand curve slope upward?
Answer
The AD curve slopes upward because consumption rises as income rises. Since investment is constant, adding the same investment amount to each level of consumption gives an upward-sloping AD curve. The…
What is aggregate supply?
Answer
Aggregate supply (AS) is the total amount of goods and services planned to be produced by producers in a given period. It is equal to national income, so AS = Y. It is also written as AS = C + S becau…
Why is aggregate supply represented by a 45° line?
Answer
The 45° line represents AS because every point on it shows equality between income and output. Since AS = Y and also Y = C + S, the 45° line shows that national income measured on one axis equals aggr…
What is the classical concept of aggregate supply?
Answer
In the classical concept, aggregate supply is perfectly inelastic with respect to the price level. This means changes in price level have no effect on aggregate supply. The AS curve is vertical and li…
What is the Keynesian concept of aggregate supply?
Answer
In the Keynesian concept, aggregate supply is perfectly elastic with respect to the price level until full employment is reached. Output can increase without a rise in price level while unemployed res…
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