i. Whenever resources are unemployed there is always some sort of waste.
ii. In the case of unemployment it manifests itself in the potential production of goods and services irretrievably lost.
iii. There are also other costs such as increased burdens to taxpayers to fund unemployment compensation programs and the individual cost in terms of a loss of self esteem and dignit

1. In the Keynesian model, output is determined mainly by aggregate demand.
2. The aggregate demand is the amount of money which entrepreneurs expect to get by selling the output produced by the number of labourers employed.
Aggregate demand has the following four components:
1. Consumption demand
2. Investment demand
3. Government expenditure and
4. Net Export (export – import)

i. Figure explains that aggregate demand price increases or decreases with an increase or decrease in the volume of employment.
ii. Aggregate demand curve increases at an increasing rate in the beginning and then increases at a decreasing rate.

1. The statement that supply creates own demand or equivalently that the aggregate in investment equals the aggregate saving always holds good in the ex post sense since it is simply an accounting identity.
2. Say’s law of markets, however, states that these two are equal in ex ante sense, i.e the total quantity which people produce i.e., aggregate supply must be equal to the total quantity which they plan to buy i.e., aggregate demand.

The components of aggregate supply are,
(i) Aggregate (desired) consumption expenditure (C).
(ii) Aggregate (desired) private savings (S).
(iii) Net tax payments (T) (Total tax payment to be received by the government minus transfer payments, subsidy and interest payments to be incurred by the government) and
(iv) Personal (desired) transfer payments to the foreigners (Rf) (eg. Donations to international relief efforts)

The aggregate demand is the amount of money which entrepreneurs expect to get by selling the output produced by the number of labourers employed. Therefore, it is the expected income or revenue from the sale of output at different levels of employment.
Aggregate demand has the following four components:
(i) Consumption demand
(ii) Investment demand
(iii) Government expenditure and
(iv) Net Export (export - import)