Advertisement Remove all ads

Effective Demand is Also Called Macro Economic Equilibrium. - Economics

Advertisement Remove all ads
Advertisement Remove all ads
Advertisement Remove all ads

Effective demand is also called macro economic equilibrium.

Advertisement Remove all ads

Solution

According to Keynes effective demand is determined with the intersection of aggregate demand and aggregate supply in the economy

The aggregate demand consists of consumption demand, investment demand, government demand, and foreign demand. Similarly aggregate supply depends on natural resources, labour, capital and technology.

The equilibrium point of effective demand is that point, where aggregate demand function equals to aggregate supply function.

Effective Demand can be shown in the following diagram.
 
The diagram indicates.

ASF = Aggregate Supply Function Curve

ADF = Aggregate Demand Function Curve

e = Point of effective demand (Equilibrium point) is a point at which total expenditure is equal to total income i.e. ADF intersect ASF at this point.

Concept: Meaning and Features of Macro Economic
  Is there an error in this question or solution?

APPEARS IN

Video TutorialsVIEW ALL [1]

Advertisement Remove all ads
Share
Notifications

View all notifications


      Forgot password?
View in app×