Question

Which of the following is a distinguishing characteristic of a Keynesian cross diagram?

A. real GDP on the horizontal axis
B. a flat line
C. 45-degree line
D. several different Phillips curves

Answer 1

45 degree line

Explanation:

A distinguishing characteristic of a Keynesian cross diagram is the 45-degree line.

The Keynesian cross diagram is a simple graphical representation of the relationship between aggregate expenditure and real GDP in an economy. It shows the equilibrium level of real GDP where aggregate expenditure equals real GDP, and helps to illustrate the effects of changes in aggregate expenditure or other factors on the economy.

The 45-degree line in the Keynesian cross diagram represents the level of real GDP where aggregate expenditure equals real GDP, or where there is equilibrium in the economy. Points below the 45-degree line indicate that aggregate expenditure is less than real GDP, while points above the 45-degree line indicate that aggregate expenditure is greater than real GDP. The slope of the aggregate expenditure function determines the sensitivity of real GDP to changes in aggregate expenditure.