Question

Under the Keynesian theory, ‘Reference Line’ is a straight line passing through the origin drawn at an angle of ..............

• A. 25°
• B. 45°
• C. 55°
• D. 75°

Hint:

The 45° Reference Line is crucial in Keynesian economics because it helps visualize where the economy's total output equals total spending.

Answer 1

The Correct Option is B

In Keynesian economics, the Reference Line denotes the income level at which aggregate demand and aggregate supply are equal. This 45° line illustrates the correlation between aggregate income and expenditure.