John Maynard Keynes developed his theory of Income and Employment on the basis of short period analysis according to which Effective Demand determines the level of income and employment. When the Effective Demand increases, production also increases due to which level of income increases. Consequently, level of employment also increases.It can briefly be said that:
- Employment is the function of national Income
Effective Demand is determined by Aggregate Demand and Aggregate Supply. According to Keynes, Aggregate Supply does not change in the short period because supply is related to technical level and technical changes do not take place in the short period. This is the reason that Supply Function remains stable in the short period.
0 comments:
Post a Comment