Edited by Robert W. Dimand and Harald Hagemann
Chapter 35: Effective demand
To attack Say’s law in The General Theory Keynes defines the point of effective demand as the single intersection of the aggregate supply function and the aggregate demand function. The aggregate supply function (Z) represents entrepreneurial expectations of sales receipts (in monetary terms) that would induce them to hire a specific number of workers (N). The larger the expected sales revenue value of Z, the more workers entrepreneurs would be induced to hire. Thus the aggregate supply curve would be upward sloping. The aggregate demand function (D) represents total spending in money terms on produced goods and services or any given level of aggregate employment. Aggregate money spending increases as employment rises.
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