Keynesian Cross Model Explained. Imagine an economy with the following characteristics. In the expenditure output or keynesian cross model the equilibrium occurs where the aggregate expenditure line ae line crosses the 45 degree line.
Change in income due to change in government expenditure. It first appeared as a central component of macroeconomic theory as it was taught by paul samuelson in his textbook economics. A graphical depiction created by students of keynes in order of exposition for his basic ideas.
Summary the expenditure output model or keynesian cross diagram shows how the level of aggregate expenditure varies with the.
The equilibrium in the diagram occurs where the aggregate expenditure line crosses the 45 degree line which represents. It is the point of intersection of the aggregate expenditure curve ad1 and the 45 degree line which shows points where aggregate expenditure equals production is the market clearing output level of goods. Keynesian model with government. Equilibrium in the goods market occurs when expenditure equals production.
