Question

Equilibrium level income as per the Keynesian theory is determined where ______.

Options

• aggregate demand curve intersects the 45° line.

• the point of intersection of the saving curve and investment curve.

• both (a) and (b)

• none of these

Answer 1

Equilibrium level income as per the Keynesian theory is determined where aggregate demand curve intersects the 45° line and the point of intersection of the saving curve and investment curve.

Explanation:

• In Keynesian theory, equilibrium income is determined where aggregate demand equals aggregate supply (shown by the 45° line) and also where saving equals investment.
•  Both conditions reflect the same equilibrium point in the income-expenditure model.