Determination of National Income
Determination of National Income
It will be helpful to state here the simplifying assumptions, which are made to specify the model of a hypothetical simple economy for the sake of simplicity in the analysis. According to Keynes, the quantity of employment depends on national income and production level. On the one Keynes theory determines employment level and on the other side, the determination of national income is also there. Keynes theory is related with the short run, not with the long run. According to him long run is in view. It is not compulsory that the capacity of production is being utilised in short-run. On the other hand, it is not necessary the economic equilibrium may be on the full employment level. He accepted that equilibrium stage becomes on the less level of the full employment level.
