Define effective demand. Discuss how effective demand can be restored if
ex-ante saving is less than ex-ante investment
Answers
Effective demand is that level of aggregate demand which becomes effective in determining equilibrium level of income because it is equal to aggregate supply.
It is the level at which AD=AS
If ex ante AD is more than ex ante AS, the flow of goods and services tends to be less than their demand and the existing or planned stock id sold out. To restore back the level, the producers would plan to increase their production. In this AS would increase and become equal to AD.
Answer:
Effective demand refers to the willingness and ability of consumers to purchase goods at different prices. It shows the amount of goods that consumers are actually buying. In Keynesian economics, effective demand is the point of equilibrium where aggregate demand equals aggregate supply.
Explanation:
· Effective demand is that level of aggregate demand which becomes effective in determining equilibrium level of income because it is equal to aggregate supply. please follow me