THEORY OF INCOME DETERMINATION

MPC=

• change in consumption/change in income

• income/consumption

Components of Aggregate demand are

• Consumption(C) & Investment(I)

• Consumtion(C) & saving(S)

National income is determined where

• AD=AS

• AD+AS

Autonomous consumption is equal to

• Saving

• Dissaving

Y=C+=?

• Saving(S)

• Export(X)

APC+APS=?

• 1

• zero

Investment multiplier=

• change in income/change in investment

• income/saving

Relation between Multiplier and MPC=

• Direct

• Inverse

Two components of AS(Aggregate supply) are

• C+G

• C+S

To reduce infaltionary gap Bank rate should be

• increased

• Decreased