TWO-SECTOR KEYNESIAN MODEL: A model used to identify equilibrium in Keynesian economics based on aggregate expenditures by the two basic sectors (household and business). Equilibrium is achieved at the intersection of the aggregate expenditures line, AE = C + I, and the 45-degree line, Y = AE. This is the most basic Keynesian aggregate expenditures model that captures an induce expenditure (consumption) and an autonomous expenditure (investment). See also | Keynesian economics | Keynesian equilibrium | consumption line | aggregate expenditures line | 45-degree line | household sector | business sector | three-sector Keynesian model | four-sector Keynesian model |
