Principle of effective demand

In Keynesian Economics, the principle of effective demand is the principle that the aggregate demand function and the aggregate supply function intersect each other at the point of effective demand generally entailing under-employment and under-capacity utilization. That is to say, "demand creates its own supply" in contrast to the Say's law which insists "supply creates its own demand". According to the principle of effective demand, the aggregate demand determines the level of output and employment in a country. "Principle of effective demand" is the title of chapter 3 of Keynes's General theory.