Answer to Question #94277 in Macroeconomics for Nomthandazo

Question

in the simple Keynesian model
(1) production is always equal to aggregate expenditure
(2) aggregate expenditure is less than production
(3) aggregate demand determines production
(4) aggregate supply determines production

Answer 1

(3) aggregate demand determines production

Keynes proposed a model that allowed us to determine the value of the equilibrium national income and, accordingly, the value of the equilibrium volume of production, proving that the value of aggregate output is determined by the value of total expenditures, i.e. demand determines supply.