Why is AS=Y?
Dear Student,
Aggregateaggregate supply refers to the value of total output of goods and services produced in an economy in a year in other words aggregate supply is equal to the value of national product that is national income it is depicted with the 45 degree line originating from the point of origin does the 45 degree line from the origin which make 45 degree angle with the axis shows both the aggregate supply and national income in money terms Silsila two sector model income is partly spent in the form of consumption expenditure and is partly save therefore in national income is the sum total of consumption expenditure and savings. we know that, Income = Consumption expenditure+ saving expenditure, So, ultimately, Income = Demand and So, Demand = Supply for equilibrium condition.
Thus, AS = Y = C+S , where - AS = Aggregate Supply , Y = Income, C = Consumption and S= Savings.
Regards
Aggregateaggregate supply refers to the value of total output of goods and services produced in an economy in a year in other words aggregate supply is equal to the value of national product that is national income it is depicted with the 45 degree line originating from the point of origin does the 45 degree line from the origin which make 45 degree angle with the axis shows both the aggregate supply and national income in money terms Silsila two sector model income is partly spent in the form of consumption expenditure and is partly save therefore in national income is the sum total of consumption expenditure and savings. we know that, Income = Consumption expenditure+ saving expenditure, So, ultimately, Income = Demand and So, Demand = Supply for equilibrium condition.
Thus, AS = Y = C+S , where - AS = Aggregate Supply , Y = Income, C = Consumption and S= Savings.
Regards