The concept of 'Effective Demand' in Keynesian economics determines:
A. Only the money supply
B. Only the interest rate
C. The level of employment and output
D. Only the price level
Answer: Option C
Solution (By JKSSB Mock Tests)
According to Keynes, the level of effective demand (where aggregate demand equals aggregate supply) determines the equilibrium level of employment and output.
Explanation:
Average Propensity to Consume (APC) = Total Consumption / Total Income. Marginal Propensity to Consume is the change in consumption divided by the change in income.
No comments yet. Be the first to start the discussion!