10:51 a is Autonomous consumption (that consumption which a consumer has to do even when he/she has zero income, for example the consumption of necessity goods)
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The Keynesian theory of employment and income is explained in terms of the equality of aggregate supply (C+S) and aggregate demand (C+I). Since unemployment results from the deficiency of aggregate demand, employment and income can be increased by increasing aggregate demand. Assuming the propensity to consume to be stable during the short-run, aggregate demand can be increased by increasing investment. Once investment increases, employment and income increase. Increased income leads to a rise in the demand for consumption goods which leads to further increase in employment and income. Once set in motion, employment and income tend to rise in a cumulative manner through the multiplier process till they reach the equilibrium level. According to Keynes, the equilibrium level of employment will be one of under-employment equilibrium because when income increases consumption also increases but by less than the increase in income.
This behaviour of the consumption function widens the gap between income and consumption which ordinarily cannot by filled up due to the lack of required investment. The full employment income level can only be established if the volume of investment is increased to fill the income-consumption gap corresponding to full employment
there is not guarantee that the investment demand will be equal to the saving gap corresponding to full-employment level of income. There are various reasons for this. First, the people who save are not necessary those who make investment; while it is the general public which save but only few people constituting the entrepreneurial class undertakes investment. Secondly, the factors which determine saving are quite different from those which determine investment. While the people save for providing for the education, marriages of their children and also for contingency purposes such as diseases and unemployment periods, they also save in order to acquire durable goods such as houses, gold and jewelry. They also save to accumulate sufficient funds for their old age. But the level of investment
depends upon marginal efficiency of capital and rate of interest in the short run and on the level of population, technological progress in the long run. Therefore, it is not essential that investment should be equal to the amount of savings by the people at full-employment level. If due to the adverse changes in the profit expectations of the entrepreneurs, level of investment falls, the equilibrium level of national income will also decline. It is also worth noting that if the aggregate expenditure income beyond the C + I in Figure. It will mean that the economy is spending and demanding more than it can produce. The result of this will be rise in prices of the commodities.
Dear Bridget Hope, thanks for writing to us. We hope you liked the video. We will ask the faculty to reply you regarding the issue you are not clear. In the meantime you can visit our channel for more such videos choosing from a collection of around 6000 videos in 100s of different subjects: ruclips.net/channel/UC6E97LDJTFJgzWU7G3CHILwplaylists?shelf_id=0&sort=dd&view=1 Alternatively browse through our website www.edupediaworld.com and watch the video you want to learn. Watch, Share and Stay Tuned. Best Wishes and Happy learning.
Dear Ashley Frank, thanks for reaching out to us. We hope you liked our video. We will ask our faculty to check it and put a rectification note if need be. Thanks a lot for the comment pointing it out. You can visit our channel and watch more such videos choosing from a collection of around 6000 videos in 100s of different subjects: ruclips.net/channel/UC6E97LDJTFJgzWU7G3CHILwplaylists?shelf_id=0&sort=dd&view=1 Alternatively browse through our website www.edupediaworld.com and watch the video you want to learn. Watch, Share and Stay Tuned. Best Wishes and Happy learning.
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*Beautyfully Explained*
Understood the concept really well, Thanks 💯👨🏫
Thanks ✌️
Mam simply superb nice explanation you have made the concept to understand easily thanks a lot
Thanks so much ma'am, your explanations were simple and understandable
I love you ❤️
10:51
a is Autonomous consumption (that consumption which a consumer has to do even when he/she has zero income, for example the consumption of necessity goods)
@@RiteshKumar-qe1qd didn't get u
thanks for giving better knowledge
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Thank you so much
Superb👌👌👍👏
mam good explanation . plz put a video about other functions of two sector model.
very good explanation .. thank you ma'am :)
Welcome! Stay Tuned!
Ma'am in case of
Ad>As
How can (logically)
The economy invest more than it saves.
Considering investment is made from savings?🙏
Thanku so much! :D
That was very helpful
Thank you
Thanks maim
Good
Thanks
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Thank you mam....
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Clear voice
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Thanks Mam!
Can u pls explain
Why keynesian equilibrium not take place at full employment ?
Pls reply ,
The Keynesian theory of employment and income is explained in terms of the
equality of aggregate supply (C+S) and aggregate demand (C+I). Since
unemployment results from the deficiency of aggregate demand, employment and
income can be increased by increasing aggregate demand.
Assuming the propensity to consume to be stable during the short-run, aggregate
demand can be increased by increasing investment. Once investment increases,
employment and income increase. Increased income leads to a rise in the demand
for consumption goods which leads to further increase in employment and income.
Once set in motion, employment and income tend to rise in a cumulative manner
through the multiplier process till they reach the equilibrium level. According to
Keynes, the equilibrium level of employment will be one of under-employment
equilibrium because when income increases consumption also increases but by less
than the increase in income.
This behaviour of the consumption function widens the gap between income and
consumption which ordinarily cannot by filled up due to the lack of required
investment. The full employment income level can only be established if the volume
of investment is increased to fill the income-consumption gap corresponding to full
employment
there is not guarantee that the investment demand will be equal to the saving
gap corresponding to full-employment level of income. There are various reasons for
this. First, the people who save are not necessary those who make investment; while
it is the general public which save but only few people constituting the
entrepreneurial class undertakes investment. Secondly, the factors which determine
saving are quite different from those which determine investment.
While the people save for providing for the education, marriages of their children and
also for contingency purposes such as diseases and unemployment periods, they
also save in order to acquire durable goods such as houses, gold and jewelry. They
also save to accumulate sufficient funds for their old age. But the level of investment
depends upon marginal efficiency of capital and rate of interest in the short run and
on the level of population, technological progress in the long run.
Therefore, it is not essential that investment should be equal to the amount of
savings by the people at full-employment level. If due to the adverse changes in the
profit expectations of the entrepreneurs, level of investment falls, the equilibrium
level of national income will also decline.
It is also worth noting that if the aggregate expenditure income beyond the C + I in
Figure. It will mean that the economy is spending and demanding more than it can
produce. The result of this will be rise in prices of the commodities.
where from you got 0.5 as mpc？
Thank
THANKYOUUUUUU
Why is the investment always constant?
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Because it is autonomous.
It means it is not influenced by national income
Please can I know why the aggregate demand curve is coming from 100 on the y axis
please in hindi language
Mam can u explain this in hindi plzz
24:06
Income is determined by "Y". NOT "I".
Dear Ashley Frank, thanks for reaching out to us. We hope you liked our video. We will ask our faculty to check it and put a rectification note if need be. Thanks a lot for the comment pointing it out.
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She has used Y only understand properly bro
Naushad Khan fyi, they admitted the mistake. YOU understand properly mate :)
@AVF She stated it that income is denoted by Y and I is denoted as investment