The equilibrium output of such an economy is that level of output at which the total amount of planned spending is just equal to the amount produced, or GDP.
That is, equilibrium GDP = C + Ig.
Consumption expenditures rise with GDP while planned gross investment expenditures are independent of the level of GDP.
What is the equilibrium level of GDP?
Most simply, the formula for the equilibrium level of income is when aggregate supply (AS) is equal to aggregate demand (AD), where AS = AD. Adding a little complexity, the formula becomes Y = C + I + G, where Y is aggregate income, C is consumption, I is investment expenditure, and G is government expenditure.
How do you calculate equilibrium GDP?
E=C+I+G+NX [Aggregate demand is the total of consumption, investment, government purchases, and net exports.] E=Y* [In equilibrium, total spending matches total income or total output.] Calculate the equilibrium level of GDP for this economy (Y*).
What is equilibrium output?
Equilibrium output is an economics term for finding the output where demand equals supply. Your demand and supply function will look something like demand equals 30-10P and supply equals 3+14P, where “P” is the output level. Set the two functions to equal each other.
What is equilibrium national income?
Equilibrium level of national income. The equilibrium, in the macro sense, will occur at the level of real national income or output at which the total planned expenditure on output equals the quantity of goods and services firms are willing and able to supply. This is at an output level of Y* and a price level of P*.