Managerial Economics

Chapter 17

Classical Model of Income Determination

After studying this chapter, you should be able to understand:

• With advent of Keynes’ book, The General Theory of Employment, Interest and Money, in the year 1936, began the Keynesian era.
• It was followed by the development of the supply side economics.
• Whether it is the individual, the consumer, the firm or the government, macroeconomics is important for all.
• The variables in any economic model can be a stock or a flow.
• A static relationship exists when all variables relate to the same time and a dynamic relationship exists when all the variables relate to different times.
• A given set of relationships between the variables may lead to equilibrium or a disequilibrium solution.
• Say’s law states ...