When the Keynesian-cross model is in equilibrium, income equals output and aggregate expenditure equals output.

Question

Quizplus · Accepted Answer

This is a fundamental principle of the Keynesian-cross model. The equilibrium point is where the 45-degree line (where output equals income) intersects with the aggregate expenditure line, meaning that when these two lines intersect, income/output and aggregate expenditure are equal.

When the Keynesian-Cross Model Is in Equilibrium, Income Equals Output