Practicing Success

Target Exam

CUET

Subject

Economics

Chapter

Macro Economics: Determination of Income and Employment

Question:

According to which theory, the equilibrium level of income is determined where planned level of aggregate demand is equal to planned level of aggregate supply?

Options:

Ricardian theory

Smith's theory

Keynesian theory

Robinson's theory

Correct Answer:

Keynesian theory

Explanation:

According to Keynesian theory, the equilibrium level of income is determined where planned level of aggregate demand is equal to planned level of aggregate supply. Income/output/employment are in equilibrium at that level where the AD = AS i.e. aggregate demand is equal to aggregate supply.