Determination Of Income And Employment

Step 1: Understanding Keynesian theory.
John Maynard Keynes' economic theory emphasizes the role of government intervention in managing economic cycles. The theory involves effective demand, the propensity to consume, and the propensity to save.

Step 2: Conclusion.
Thus, the correct answer is option (4) All the above.

Step 1: Understanding Effective Demand.
Effective demand refers to the total demand for goods and services in an economy at a particular price level, which is backed by the actual purchasing power of consumers. It is the demand that is backed by sufficient income or credit to buy goods and services.

Step 2: Conclusion.
Thus, effective demand occurs when consumers have the ability to pay for the goods they demand.

Step 1: Understanding Excess Demand.
Excess demand occurs when the demand for goods and services in the economy exceeds the supply at the current price level. This often leads to inflationary pressures in the economy.

Step 2: Conclusion.
Excess demand signifies an imbalance where consumers wish to buy more than what is available, which can push prices higher in the economy.