![Session Outline ,[object Object],[object Object],[object Object],[object Object],[object Object],06/07/09](data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7)
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Keynesian Logic
- 1. The Simple Keynesian Model of Income Determination
- 10. Consumption and income are positively related i.e., greater the income, greater is the consumption. Let us assume that consumption demand increases linearly with an increase in the income level. Then we have, C = a + bY; a > 0, 0 < b < 1 Where ‘a’ is the consumption when the income level is zero and ‘b’ is the slope of the consumption function. ‘ b’ represents the marginal propensity to consume (MPC) i.e., the rate at which consumption changes for a unit change in income.
- 15. Planned (I), Government (G) and Net Exports (NX) 06/07/09
- 16. Planned Investment (I), Government Purchases (G) and Net Exports (NX) 06/07/09 C = a +bY AD = +bY Y AD a
- 20. Equilibrium Income 06/07/09 C = a +bY AD = +bY Y AD 45 0 Y* a
- 21. Deriving Equation for Equilibrium Level of Income 06/07/09
- 24. Multiplier 06/07/09 AD 2 = 2 +bY Y AD 45 0 Y 2 * AD 1 = 1 +bY Y 1 *
- 26. Deriving Equation for Multiplier 06/07/09
- 29. Deriving Multiplier (with the inclusion of Government Sector) 06/07/09
- 32. Income Determination in an Open Economy and the Foreign Trade Multiplier 06/07/09