Question

explain the importance of effective demand?​

Answer 1

Answer:

Effective Demand determines the level of employment. When effective demand increases employment also increases and when it decreases employment also decreases. According to Keynes, involuntary unemployment can be removed by raising consumption expenditure and investment expenditure.

Explanation:

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Answer 2

Effective demand is important for an economy because it determines the level of employment.

Explanation:

• Effective demand and the changes in employment are directly proportional to each other. If effective demand increases employment will also increase, and if the effective demand decreases then employment will also decrease.
• Unemployment can be removed by increasing consumption and investment which are known to be two determinants of effective demand.
• Effective demand will calculate the ability of customers to buy the goods at different prices.
• Keynesian theory is used to define that the effective demand will not achieve full employment due to no workers without proper income