Economic Graph Depicting GDP vs AE

This graph illustrates a fundamental concept in macroeconomics: the Keynesian Cross model. It visually explains how aggregate expenditure determines the equilibrium level of gross domestic product. We can observe a 45-degree line, signifying points where total output matches total spending. An initial aggregate expenditure line, labeled AE0, intersects this 45-degree line at an equilibrium output marked Y0. The presence of a second, higher aggregate expenditure line suggests an increase in overall spending, leading to a new, larger equilibrium output at Y1. The dashed red lines help highlight the changes in equilibrium output and possibly the spending gap.

economics - macroeconomics - keynesian cross - aggregate expenditure - gdp - equilibrium - economic model - output