Long description

The figure is a screenshot of the Aggregate Demand Interactive chart.

It shows the answer to Activity 8 question (a) which asks you to input specified values for exogenous consumption, the marginal propensity to consume, investment and the full employment equilibrium.

The diagram shows what the Aggregate demand chart should look like with these values inputted. Above the chart, it says that this is for a closed economy without government.

Aggregate Demand in millions of £ (£m) is shown on the vertical axis, starting at 0 and rising to 2000, at intervals of 100. Income in £m is on the horizontal axis, starting at 0 and rising to 2000 at intervals of 100.

The 45 degree line is shown in brown. The Aggregate Demand function is shown in red. The full employment equilibrium level is shown at a level of income of £800m. A vertical full employment income line is drawn in purple from this point to intersect the 45 degree line.

Just on the right of the chart is a legend showing the colour coding for the three lines. This legend tells us that the full employment income is denoted as Yf.

The AD line intersects the 45 degree line at an income level Y of £600m, below the full employment level of income Yf.