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 (or output) and the level of total spending in the economy. It is based on the assumption that prices are fixed and that there is a direct relationship between spending and output. Therefore, it is used to analyze the impact of changes in spending, such as government spending or investment, on the level of output and employment in the economy. It does not directly relate to aggregate demand and supply, price level, or full employment and price level.

The Keynesian Cross Diagram Shows