Question

In the Keynesian system, the equilibrium level of employment is determined by ______.

Options

• Aggregate supply alone

• Aggregate demand alone

• The interaction of aggregate demand and aggregate supply

• Government expenditure only

Answer 1

In the Keynesian system, the equilibrium level of employment is determined by the interaction of aggregate demand and aggregate supply.

Explanation: 

In Keynesian theory, aggregate demand and aggregate supply together determine the equilibrium level of employment, called the level of effective demand.