Question

What is meant by aggregate supply in macroeconomics?

Answer 1

• The money worth of all the goods and services produced in an economy over the course of a year is referred to as aggregate supply. Stated otherwise, the value of the national product, or national income, is equal to the total supply. The 45° line drawn from the point of origin represents it.
• Therefore, both the total supply and the national income in monetary terms are displayed by the straight line from the origin that forms a 45° angle with the X-axis. The vertical distance between a location on a 45° line and a corresponding point on the X-axis is used to calculate the aggregate supply.
• At every output level, the income displayed on the horizontal axis is precisely equal to this vertical distance. As a result, revenue can be measured vertically on the 45° line or horizontally along the axis. National income, or the aggregate supply, can be expressed as the sum of consumption spending and saving, as income in a two-sector model is partially saved and partially spent as consumption expenditure.
  AS = Y = C + S