<> Keynes had a vision of how the economy worked that was markedly different from that of the standard neo—classical theory. 3 0 obj They regarded unemployment as a temporary phenomenon and assumed that there is always a tendency towards full employment. Keynesian economics gets its name, theories, and prin-ciples from British economist John Maynard Keynes (1883–1946), who is regarded as the founder of modern macroeconomics. �5�Uvk�V��s—�����p�+�占�&^��N1'�Y�[�5nX~1��.RU�\��R��I��>�4ME��}l�G^c��k��:,�Ϧ���. In the following section I will review both presenting a short introduction with special attention to the basic ingredients (labor supply, labor demand and wage equation) as well as the effect of … %PDF-1.5 endobj �:(�z Define Keynes concepts of equilibrium aggregate Income and output in an economy. Two important theories of income and employments are : 1.   Keynesians believe consumer demand is the primary driving force in an economy. 0000094273 00000 n <> 0000031679 00000 n KEYNESIAN MODEL VIII. The Keynesian theory of the determination of equilibrium output and prices makes use of both the income‐expenditure model and the aggregate demand‐aggregate supply model, as shown in Figure . Section 7 draws some conclusions. ��z21&@�H ���@� �� 8��� endstream endobj 115 0 obj 501 endobj 91 0 obj << /Type /Page /Parent 83 0 R /Resources 92 0 R /Contents 98 0 R /MediaBox [ 0 0 595 842 ] /CropBox [ 0 0 595 842 ] /Rotate 0 >> endobj 92 0 obj << /ProcSet [ /PDF /Text ] /Font << /TT2 93 0 R /TT4 94 0 R /TT6 101 0 R /TT8 102 0 R /TT9 103 0 R >> /ExtGState << /GS1 110 0 R >> /ColorSpace << /Cs6 96 0 R >> >> endobj 93 0 obj << /Type /Font /Subtype /TrueType /FirstChar 32 /LastChar 148 /Widths [ 250 0 408 0 0 833 0 0 333 333 500 564 250 333 250 278 500 500 500 500 500 500 500 500 500 500 278 278 0 0 0 444 921 722 667 667 722 611 556 722 722 333 389 722 611 889 722 722 556 722 667 556 611 722 722 944 0 722 0 0 0 0 0 0 0 444 500 444 500 444 333 500 500 278 278 500 278 778 500 500 500 500 333 389 278 500 500 722 500 500 444 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 333 333 444 444 ] /Encoding /WinAnsiEncoding /BaseFont /KEIJCK+TimesNewRoman /FontDescriptor 97 0 R >> endobj 94 0 obj << /Type /Font /Subtype /TrueType /FirstChar 32 /LastChar 116 /Widths [ 250 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 722 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 500 556 444 0 0 0 0 0 0 0 0 0 0 0 0 0 0 444 389 333 ] /Encoding /WinAnsiEncoding /BaseFont /KEIJDM+TimesNewRoman,Bold /FontDescriptor 95 0 R >> endobj 95 0 obj << /Type /FontDescriptor /Ascent 891 /CapHeight 0 /Descent -216 /Flags 34 /FontBBox [ -558 -307 2000 1026 ] /FontName /KEIJDM+TimesNewRoman,Bold /ItalicAngle 0 /StemV 133 /FontFile2 106 0 R >> endobj 96 0 obj [ /ICCBased 109 0 R ] endobj 97 0 obj << /Type /FontDescriptor /Ascent 891 /CapHeight 656 /Descent -216 /Flags 34 /FontBBox [ -568 -307 2000 1007 ] /FontName /KEIJCK+TimesNewRoman /ItalicAngle 0 /StemV 94 /XHeight 0 /FontFile2 107 0 R >> endobj 98 0 obj << /Length 1917 /Filter /FlateDecode >> stream This theory served as philosophical guide to government policies in the early 1900s. �1(���� Q�Ũ�X��#�i�a�4����Z���2�Ɠ��O�Si(��tB~��0��� ; Since Keynes assumes all these four quantities, viz., effective demand (ED), output (Q), income (Y) and employment (N) equal to each other, he regards employment as a function of income. Output creates income. �� � w !1AQaq"2�B���� #3R�br� 0000006571 00000 n )-,3:J>36F7,-@WAFLNRSR2>ZaZP`JQRO�� C&&O5-5OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO�� W�" �� Keynes, in The General Theory of Employment, Interest and Money – hereafter Gen- eral Theory – proposed an economic agenda in order to address t he fact that “the out- The nineteen-thirties was the most turbulent decade that set off the most rapid advance in economic thought with the publication of Keynes’s General Theory of Employment… 0000001939 00000 n 0000005624 00000 n ����8c�b�:놾���o{�[2��jP��p^yr�0�IP� (1937b) “The General Theory of Employment”, Quarterly Journal of Economics, 51: 209–23. Keynesian Theory of Income and Employment! %PDF-1.3 %���� Consequently, real wage cannot be considered as a mechanism to adjust employment anymore but labor demand does. <> If temporary unemployment occurs, then wages will fall and Say’s Law will operate to return the economy back to the full employment position. 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