Page 68 - DECO201_MACRO_ECONOMICS_ENGLISH

Ashwani Panesar, Lovely Professional University
Unit 4: Theories of Income, Output and Employment: Keynesian Theory

Unit 4: Theories of Income, Output and Notes
Employment: Keynesian Theory

CONTENTS
Objectives

Introduction
4.1 Keynesian Theory of Income, Output and Employment
4.1.1 Concepts
4.1.2 Equilibrium Level of National Income

4.1.3 Paradox of Thrift
4.1.4 Equilibrium of National Income with Government
4.2 Effective Demand
4.2.1 Aggregate Demand Curve

4.2.2 Aggregate Supply Curve
4.3 Classical vs. Keynesian Theory
4.4 Summary
4.5 Keywords

4.6 Review Questions
4.7 Further Readings

Objectives

After studying this unit, you will be able to:
Explain the concepts of aggregate demand;

Discuss the aggregate supply;
Discuss the Keynesian theory of income and employment;
Contrast the Classical and Keynesian theory.

Introduction

After learning about the Classical Theory in previous unit, we now move to the Keynesian
version of the theory. The classical economists failed to explain the persistent high levels of
unemployment and the low levels of business productivity in those times so Keynesian Model
gained prominence.

Did u know? Keynes published a book titled 'General Theory of Employment, Interest and
Money' in the year 1936, in which he attacked the classical views for not dealing with the
economic problems of the real world properly.

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