In the simple Keynesian model, equilibrium exists when
A) investment spending equals saving.
B) quantity supplied equals quantity demanded.
C) consumption equals investment.
D) the price accepted by demanders equals the price offered by suppliers.

Question

Quizplus · Accepted Answer

In the simple Keynesian model, equilibrium in the goods market is achieved when investment spending equals saving. This is because, in this model, total output (or income) is determined by the level of aggregate demand, and saving is considered a leakage from the expenditure stream that must be balanced by an injection, such as investment, for the economy to be in equilibrium.

In the Simple Keynesian Model, Equilibrium Exists When