National Income has a long history. Income has not always been clearly distinguished from wealth. Income is a flow that can only be measured over a period of time, such as a week, month, or year, whereas wealth refers to the value of a stock of assets that can be measured at a point of time. Attempts to estimate the Nation's Income go back over three centuries to the work of William Petty (1662). However, he was more concerned with measuring the wealth of the nation and taxable capacity than income. The same preoccupation with wealth rather than income is found a century later in Adam Smith's The Wealth of Nations (1950). The extent to which macroeconomic data can be influenced by ideas, concepts, and definitions is vividly illustrated by the distinction that Smith introduced between ‘productive’ and ‘unproductive’ labor. Smith argued that only workers who produced goods, as distinct from services, should be regarded as productive because only goods could add to the stock of the nation's productive capital equipment. This distinction was followed by many classical economists in the early nineteenth century, including Karl Marx in Das Kapital (1867). In the international version of that system developed after the second world war under the auspices of the United Nations it is stated that: ‘All fields of productive activity are based on material production, which is primary in comparison with the activities rendering services. 

According to which theory an economy may function at less than full employment equilibrium?

Keynesian theory

According to Keynesian theory, the economy can be in full employment equilibrium (AD = AS), over full employment equilibrium (AD > AS) or under full employment equilibrium ( AD < AS).