Aggregate Demand is Basically
$$ AD = C + I + G + X - M $$
Is not this national income Through Expenditure Method ?
Then why don't we treat AD equal to National Income ?
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1 Answer
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The existence of aggregate demand does not mean that aggregate demand is fulfilled. For instance if the aggregate planned demand is 100 billion dollars and due to crisis or war output is very low at just 10 billion dollars. Does the national income equal 100 billion dollars?
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$\begingroup$ So the difference is AD is planned while NY is actual ? $\endgroup$– JIMNov 16, 2018 at 15:38