The Keynesian cross diagram shows
A) the relationship between equilibrium income and full employment.
B) the relationship between aggregate demand and aggregate supply.
C) the relationship between equilibrium demand and the price level.
D) the relationship between full employment and the price level.

Question

Quizplus · Accepted Answer

The Keynesian cross diagram shows the relationship between equilibrium income and full employment. It is a graphical representation of the Keynesian theory that emphasizes the importance of aggregate demand in the economy. The horizontal axis represents income or output, while the vertical axis represents aggregate demand. The point at which aggregate demand crosses the 45-degree line represents the equilibrium level of income, which is where aggregate demand equals output.

The Keynesian Cross Diagram Shows