We may turn to a detailed discussion of the multiplier effects of change in tax. As we already know, the effects of two types of taxes on equilibrium national income, viz., lumpsum tax and proportional tax. Both types of taxes reduce Y, but in different ways. We will now see that both have a multiplier […]
Tax and Budget Multiplier | Income Determination | Macroeconomics
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National Income and Foreign Trade Multiplier | Macroeconomics
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Keynes explained the process of income determination in a closed economy and used the theory of multiplier to explain how a small increase in autonomous investment leads to a multiple increase in national income. Now we extend the basic Keynesian model to show how national income is determined in open economy and how the multiplier […]
Keynesian Two-Sector Model of Income Determination | Macroeconomics
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According to the Keynesian theory, level of employment is determined in a free market-based capitalist economy in the short run when the size of the labour force and capital stock remain constant and the state of technology (which shows how inputs can be converted into output) also remains unchanged. In addition, Keynes assumed that the […]
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