Question

In Keynesian model of income determination ______.

Options

• total income in the short-run depends on the desired aggregate demand in the economy.

• aggregate demand is positively related to income.

• it is always equal to income.

• both (a) and (b)

Answer 1

In Keynesian model of income determination total income in the short-run depends on the desired aggregate demand in the economy and aggregate demand is positively related to income.

Explanation:

The Simple Keynesian model states that in the short run, an economy's total income depends on aggregate demand. Higher desired spending leads to higher production and income levels. Thus, aggregate demand drives income and output in the economy.