Equilibrium Levels of Real National Output

Question 1

Aggregate demand

Answer 1

Total amount of goods and services demanded in the economy at a given time and price level. It is the sum of consumption expenditure, investment expenditure, government expenditure and net exports.

Question 2

Aggregate supply

Answer 2

Total planned output of goods and services in an economy at a given time and price level.

Question 3

Equilibrium national output

Answer 3

Equilibrium means ‘at rest’ or ‘a state of balance’ - i.e. a situation where there is no tendency for change. At this point aggregate demand is exactly equal to aggregate supply.

Question 4

Real national output

Answer 4

Nominal national output adjusted for price changes, expressed at constant prices.