What is meant by the ‘‘Effective Demand Principle'' in the Keynesian theory of employment? Discuss using a schedule or a diagram.

According to Keyne’s theory of employment unemployment or employment is driven by demand in the country. Accordingly, the volume of employment depends upon the effective demand for goods and services in the country whereas unemployment is due to a deficiency of effective demand.

When the level of aggregate demand is equal to aggregate supply it is termed as effective demand. It is expressed by the aggregate expenditure of an economy.

AS = Aggregate Supply

AD=Aggregate Demand

E= Effective demand