ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Equilibrium in the Keynesian cross model The point where the aggregate expenditure line crosses the 45-degree line will be the equilibrium for the economy. It is the only point on the aggregate expenditure line where the total amount being spent on aggregate demand equals the total level of production.

Detailed explanation-2: -According to the Keynesian theory of Investment, the firm determines the optimal amount of Investment by taking into consideration the marginal efficiency of capital and the rate of Interest.

Detailed explanation-3: -THE KEYNESIAN THEORY OF DETERMINATION OF NATIONAL INCOME All investment outlay is autonomous (not determined either by the level of income or the rate of interest); all investment is net and, therefore, national income equals the net national product.

Detailed explanation-4: -The expenditure-output model, sometimes also called the Keynesian cross diagram, determines the equilibrium level of real GDP by the point where the total or aggregate expenditures in the economy are equal to the amount of output produced.