The theory of determination of national income is concerned with finding out the equilibrium level of national income, i.e., the level of national income at which the purchasing and production plans of the economy are synchronised. This occurs at the point of the intersection of the aggregate demand (C + I) schedule and the aggregate supply (C + S) schedule. [...]
In this article we will discuss about the importance of multiplier in the determination of national income. Also learn about the assumptions of the multiplier. One of the central concepts of modern macroeconomics is the multiplier. The Keynesian income determination model shows how the interaction of consumption and investment spending determines the level of national output. Clearly, an increase in [...]
The following points highlight the top two methods of determining equilibrium national income. The methods are: 1. Aggregate Income-Expenditure Approach 2. Savings-Investment Approach. Method # 1. Aggregate Income-Expenditure Approach: In a two-sector Keynesian model, aggregate demand is composed of planned or desired consumption demand and planned investment demand. The total of planned expenditure (C + I) must be equal to [...]