Answer to Question #86320 in Microeconomics for Randy

Question

Explain that overall levels of income, employment, and prices are determined by the spending and production decisions of households, businesses, government, and net exports

Answer 1

Increased levels of spending by households, businesses, government and purchasers of exported goods and services increase aggregate demand. Overall levels of income, employment and prices are derived from the equilibrium established through the aggregate supply/aggregate demand model. Real output at a particular price level reflects the employment and real wages established in the economy.