Determination of National
Income:
The classical economists were of the
view that
saving and investment are
always equal. They believed in the existence of a fully employed economy.
According to them, whenever their is inequality between saving and investment,
it is brought to equality through the rate of interest.
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It has been the practical experience of every country of the world that economic
progress has never run an even course. There have been wide fluctuations in the
national income from time to time.
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J.M. Keynes in his famous book, 'General theory', has used two methods for
the determination of national income at a particular time: (1) Saving
Investment Method and (2) Aggregate Demand and Aggregate Supply Method.
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J. M. Keynes in his famous book 'General Theory' put forward an analysis
of unemployment and inflation. The Keynesian theory assumes that a maximum level
of national output can be obtained at any particular time in the economy.
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