Effective demand principle ?? What was …

 The level of aggregate demand required to achieve full employment equilibrium is called effective demand. Alternatively, aggregate demand at the point of equilibrium is called an effective demand. How? Equilibrium level of national income is determined by aggregate demand and aggregate supply which become rarely equal. The particular aggregate demand which is equal to aggregate supply and determines the equilibrium national income is called effective demand. Effective demand is the total expenditure which the people are prepared to spend for purchase of goods and services.
In Keynesian framework which deals with short run analysis, it is assumed that prices of goods do not change and elasticity of supply is infinite. At the given price, output can be increased till all resources are fully employed. How much will be the aggregate output will primarily depend on how much is the aggregate demand in the economy. Thus aggregate output is determined solely by aggregate demand principle. This is called effective demand principle. Also because in short run, physical and technical conditions affecting aggregate supply do not change, so it is the level of effective demand or aggregate demand which determines the level of output, income and employment. Thus for increasing the level of income and employment, increase in effective demand is essential.