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 ...

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