Keynesian Cross
The Keynesian cross diagram is a formulation of the central ideas in Keynes' ''General Theory of Employment, Interest and Money''. It first appeared as a central component of macroeconomic theory as it was taught by Paul Samuelson in his textbook, '' Economics: An Introductory Analysis''. The Keynesian cross plots aggregate income (labelled as Y on the horizontal axis) and planned total spending or aggregate expenditure (labelled as AD on the vertical axis). Overview In the Keynesian cross diagram, the upward sloping blue line represents the aggregate expenditure for goods and services by all households and firms as a function of their income. The 45-degree line represents an aggregate supply curve which embodies the idea that, as long as the economy is operating at less than full employment, anything demanded will be supplied. Aggregate expenditure and aggregate income are measured by dividing the money value of all goods produced in the economy in a given year by a price index. ...
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