Keynesian Model: Planned Aggregate Demand and Total Output

Keynesian Model

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Question

Within the Keynesian model, when planned aggregate demand equals total output,

Answers

A. the employment rate will equal the labor force participation rate.

B. government expenditures will equal revenues.

C. the output level will tend to persist into the future.

D. income in the future will tend to rise.

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Explanations

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A. B. C. D.

Because Keynesian equilibrium is dependent on equality between planned aggregate expenditures and output, it need not take place at full employment. An economy in Keynesian equilibrium has no tendency for output to change even if output is well below full employment capacity.

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