Determination of Income and Employment — Economics STD 12 Humanities & Commerce — Question

In the economy, if AD is less than AS, it implies that the buyers are planning to purchase less than what sellers are planning to produce. As a result, inventories start piling up and rise above the desired level. Thus, the producers reduce production and workers are thrown out of jobs. This leads to a fall in the income level, i.e., AS. This downward trend continues till AD once again becomes equal to A.S., ie, the economy reaches the stage of equilibrium, i.e., AD = AS.