Question

what is the importance of Keynesian cross

Answer 1

Keynesian cross diagram, determines the equilibrium level of real GDP by the point where the total or aggregate expenditures in the economy are equal to the amount of output produced. The Keynesian cross diagram contains two lines that serve as conceptual guideposts to orient the discussion. The first is a vertical line that shows the level of potential GDP. Potential GDP means the same thing here that it means in the AD/AS diagrams: It refers to the quantity of output the economy can produce with full employment of its labor and physical capital.The 45 degree line give all ideal output levels and the crossing of aggregate demand curve is supposed to give the equilibrium output.