Question
Macroeconomics Question on Behavioural and technological functions
Which of the following statements is/are CORRECT under the Keynesian Cross (Fixed Price) Model?
A
The product market and factor market independently determine the full-employment level of output.
B
Output is determined in the product market by the aggregate expenditure.
C
Money market determines the price level, given the quantity of money and the level of output.
D
Employment is determined in the factor market by the output level determined in the product market.
Answer
Output is determined in the product market by the aggregate expenditure.
Explanation
Solution
The correct option is (B): Output is determined in the product market by the aggregate expenditure. and (D): Employment is determined in the factor market by the output level determined in the product market.