Explain what is meant by the full employment level of National Income :: Economics

Explain what is meant by the full affair level of theme Incomeand Equilibrium level of National Income. Why might these levels ofincome be different?National Income is the level of total output, expenditure or income ofan economy over a period of metre. The main measure of NY used aroundthe world today is egregious Domestic Product, or GDP. This is a measureof all domestic production, that is, production not including trade,which takes into account the value of indirect taxes such as GST. wide-eyedemployment level of National Income means the level of total outputattained when unemployment is at a socially acceptable level. In mostcases this is around 5%, however it does tend to vary. If a governmentsets a target unemployment level and this is reached, the economy issaid to be operating at full employment (Nf). Full employment also holds something called the natural rate of unemployment, whichincludes seasonal and frictional unemployment, as well as thoseindividuals who do not wi sh to be employed. In early(a) words, thenatural rate of unemployment is the proportion of the workforce whichvoluntarily remain unemployed whilst the labour market is inequilibrium.We can see, therefore, that full employment may include someunemployment, although it is usually a small percentage of the workingpopulation. Equilibrium level of employment, however, may have alarger level of unemployment. The diagram to a lower place represents a situationin which the full employment level is illustrated.National Income $100bThis diagram presents a situation where the SRAS and the AD curveintersect on the LRAS and $100b is the NY. The terms used in thediagram must be explained. SRAS stands for short run aggregate supply,which is the relationship between the aggregate supply of all finalgoods and serve and the price level, holding all else constant. Inthe short run, the prices of final goods and services can change, butthe factor prices do not. Because of this, it is not possib le togeneralise the time period referred to by the word short, as factorprices can change at any time for numerous reasons. The SRAS is upwardsloping because of the law of diminish returns, that is some inputscan increase whilst others may not, and the fact that resourcebottlenecks may occur when the economy moves towards Nf.AD stands for aggregate demand,, which is the sum of all planned disbursal in an economy. The slope of the AD curve is due to the incomeeffect and the substitute effect. AD is calculated by Consumption +Investment + Government spending + (Exports Imports), or