The macroeconomic theory seek to explain how the actual level of GDP or national income is determined with relation to the given level of potential GDP and what causes variations between actual GDP and the potential GDP. It also analyzes the phenomenon of recurring booms and recessions as well as the fluctuations in the general level of ‘national income’ ‘national output’ and GDP have been used as synonyms, i.e, having the same meaning and content and are thus assumed to be identical. the use of the term ‘national income’ is mostly made while discussing the components of aggregate spending because all spending are largely related to income levels. On the other hand the term national output or GDP is largely used while analyzing responses of producers to changes in aggregate spending. But theses three terms are taken to be identical and used interchangeably.SUBMIT ASSIGNMENT NOW!