Determination of income and employment of a two-sector model is done by:

(A) Ex-ante aggregate demand for final goods.
(B) Ex-post aggregate demand for final goods.
(C) Fixed price of final goods.
(D) Constant rate of interest.

Choose the correct answer from the options given below:

(A), (C) and (D) only

The correct answer is Option (2) → (A), (C) and (D) only

(A) Ex-ante aggregate demand for final goods. Correct. In the Keynesian two-sector model, equilibrium income is determined when ex-ante (planned) aggregate demand equals ex-ante (planned) aggregate supply. Ex-ante aggregate demand represents the total planned spending in the economy, which in a two-sector model consists of planned consumption (C) and planned investment (I). This is crucial for determining the equilibrium level of income and employment.

(B) Ex-post aggregate demand for final goods. Incorrect. Ex-post aggregate demand refers to the actual or realized aggregate demand. While ex-post aggregate demand will always equal ex-post aggregate supply (because everything produced is either consumed, invested, or ends up as unintended inventory accumulation), it doesn't determine the equilibrium. The determination happens based on the plans of economic agents, which are captured by ex-ante values.
(C) Fixed price of final goods. Correct – Keynesian two-sector model assumes that prices are fixed in the short run so that output and employment adjust to demand.
(D) Constant rate of interest.  Correct. In the simplest versions of the two-sector Keynesian model, investment is often assumed to be autonomous (not dependent on income) or, if dependent on interest rates, the interest rate itself is assumed to be constant or exogenously determined (e.g., by monetary authorities in a broader context, but simplified as fixed for this basic model). This simplification helps focus on the aggregate demand multiplier effect.