UNIT II Keynesian Theory of Determination of National Income Paper 8B Dr. Neelam Tandon Unit II Outline 1. Keynes Concept of Equilibrium Aggregate Income 2. Describe the components of aggregate expenditure in two, three and four sector economy model 3. Explain national income determination in two three and four sector economy models 4. Illustrate the functioning of multiplier 5. Outline the changes in equilibrium aggregate income on account of changes in its determinants Some Important Terms 1. Ex- Post Consumption Expenditure: This refers to actual consumption expenditure of households. Remember, consumption demand is the total expenditure which all the households in the economy have incurred on purchase of goods and services for their personal satisfaction. 2. Ex-ante Consumption Expenditure: This refers to planned (desired) consumption expenditure of households. Remember, consumption demand is the total expenditure which all the households in the economy are willing to incur on purchase of goods and services for their personal satisfaction. 3. Ex-Post Investment Expenditure: This refers to actual investment expenditure of private firms. Remember, investment demand refers to private actual [ex-post] investment expenditure by the firms.
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UNIT II
Keynesian Theory of Determination of National Income
Paper 8B
Dr. Neelam Tandon
Unit II Outline
1. Keynes Concept of Equilibrium Aggregate Income
2. Describe the components of aggregate expenditure in two, three and four
sector economy model
3. Explain national income determination in two three and four sector economy
models
4. Illustrate the functioning of multiplier
5. Outline the changes in equilibrium aggregate income on account of changes
in its determinants
Some Important Terms
1. Ex- Post Consumption Expenditure: This refers to actual consumption
expenditure of households. Remember, consumption demand is the total
expenditure which all the households in the economy have incurred on
purchase of goods and services for their personal satisfaction.
2. Ex-ante Consumption Expenditure: This refers to planned (desired)
consumption expenditure of households. Remember, consumption demand is
the total expenditure which all the households in the economy are willing to
incur on purchase of goods and services for their personal satisfaction.
3. Ex-Post Investment Expenditure: This refers to actual investment
expenditure of private firms. Remember, investment demand refers to private
actual [ex-post] investment expenditure by the firms.
4. Ex-ante Investment Expenditure: This refers to planned investment
expenditure of private firms. Remember, investment demand refers to private
planned [ex-ante] investment expenditure by the firms.
5. Equilibrium : An economy is in equilibrium when Aggregate Demand is
equal to Aggregate Supply (AD = AS). Aggregate Demand = Aggregate