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?
Answer & explanation
Correct answer: option 3
The correct answer is Option 3: Keynesian theory
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.