What are the components of aggregate demand in the Keynesian model? Ex

Question

What are the components of aggregate demand in the Keynesian model? Explain how an economy achieves equilibrium in the Keynesian model.

08 Oct 2024

Answer :

Word Count : 433

In the Keynesian model, aggregate demand (AD) is the total demand for goods and services in an economy at a given price level and within a specific period. The components of aggregate demand are:

1. Consumption (C): This refers to the total spending by households on goods and services. It is the largest component of aggregate demand and is influenced by factors such as disposable income, interest rates, and consumer confidence. In the Keynesian model, consumption increases as income rises, but not by the full amount _______ ________ _______ __________ __________ _________ ______ ________ ___ _________.
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