What is meant by equilibrium level of income?
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Can there be unemployment at equilibrium level of income? Explain.
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Can deflationary gap exist at equilibrium level of income?
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Explain that equilibrium level of income is not necessarily at full employment level. 

Meaning of equilibrium level of income. Equilibrium level of income is that level of income at which aggregate demand equals aggregate supply (and planned savings equal planned investment). At equilibrium, whatever output of goods and services is produced, is either consumed by the households or invested by the firms. There is neither surplus nor shortage in production of output in the economy. That is why equilibrium level of income is also called equilibrium level of output. Such an equilibrium can be established at both full employment level and at under-employment level.

Equilibrium in an economy. An economy is in equilibrium when aggregate demand is equal to aggregate supply (output). But equality between AD and AS does not imply that there will essentially be full employment because equality can take place even at underemployment. Equality between the two can occur even when aggregate demand is not sufficient to support aggregate supply at full employment level. In other words, equilibrium can take place even at less than full employment level, i.e., under-employment equilibrium can exist. Hence an economy can be in equilibrium when there is unemployment in the economy. Thus it is not essential that there will always be full employment at equilibrium level of income. It can be (full employment equilibrium) but it need not be. Clearly deflationery gap can exist at equilibrium level of income.
Equilibrium level of employment. The level of aggregate employment corresponding to equilibrium level of aggregate supply (i.e., when AD = AS) is known as equilibrium level of employment. And equilibrium level of employment may be of two types —full employment equilibrium and under-employment equilibrium .