Management Studies: September 2013

National Income: Various concepts of National Income | Gross Domestic Product (GDP), Gross National Product (GNP), Net National Product (NNP), National Income (NI), Personal Income (PI), Disposable Income (DI), Per Capita Income

National income refers to the total income of the nation in a particular period of time. National income data reveals the aggregate economic performance of the economy as a whole. National income – represents a receipts total, expenditure total and the total value of production. Since one person’s income is another person’s expenditure and each commodity is bought and sold

at its market prices, a national income accounting is based on the fundamental three fold identity: (i) The value received equals, (ii) The value paid equals, and (iii) The value of goods and services given in exchange.

Hence, National income = National expenditure = National Product

Marshall, Pigou & Fisher, has defined the traditional definitions of national income. According to Marshall, national income is, “The labor and capital of country acting on its natural resources produce annually a certain net aggregate of commodities, material and immaterial including services of all kinds. This is the true net annual income or revenue of the country or national dividend.”

Pigou’s definition of national income includes that income which can be measured in terms of money. According to Pigou, “National income is that part of objective income of the community, including of course income derived from abroad, which can be measured in money.”

Fisher defined on the consumption basis. According to Fisher, “The national dividend or income consists solely of services as received by ultimate consumers, whether from their material or from their human environment. Thus, a piano, or an overcoat made for me this year income, but an addition to the capital. Only the services rendered to me during this year by these things are income.”

This definition of national income is better than Marshall and Pigou because it is near to the concept of economic welfare.

Simon Kuznets and Samuelson have given the modern definitions of national income. According to Simon Kuznets, “National income is the net output of the commodities and services flowing during the year from the country’s productive system in the hand of the ultimate consumers.”

In the words of Prof. P. A. Samuelson, “National income or product is the final figure you arrive at when you apply the measuring rode of money to its land, labor and capital resources.”

Modern economists view national income as a flow of output, income and expenditure. When the firms produce goods, the factors of production are paid income in the form of wages, profits, interest, rents, etc. Households on consumption goods spend a part of these income receipts and other part is saved. The producers for investment spending mobilize the savings. Thus, there is circular flow of production, income and expenditure.

Hence, Total output = Total income = Total expenditure.

Various concepts of National Income

In modern times, a number of concept have come to be associated with the study of national income and social accounting which have made the study of national income broad based and comprehensive. The main concepts of national income are explained below:

i) Gross Domestic Product (GDP)

It is a measure of the total flow of final goods and services produced within a country over a specified time period, generally one year. It can be obtained by valuing output of goods and services at market prices and the summing that up. It includes final consumption and investment goods but it excluded intermediate product because they are already implicit in the prices of final products. In short GDP can be listed as:

GDP is expressed in money terms; it is the money value of final total goods and services produced within the country during a period of time. The value of final goods and services is calculated at the current market price; hence it is called GDP at market price.
GDP includes only those goods and services which have market value and which are brought in the market for sale.
GDP does not include depreciation of capital goods and services during the course of production as well as transfer payment and capital gains are not included under GDP.

Hence, GDP = Total agriculture product + Total industrial product + Total product of tertiary sector. By using expenditure method, it can be shown as:

GDP = C + I + G

Where, GDP = Gross Domestic Product

C = Consumption Expenditure

I = Investment Expenditure and

G = Government Expenditure

ii) Gross National Product (GNP)

Gross National Product is the total measure of the flow of final goods and services at market value produced during the year in a nation plus net foreign incomes. GNP is a broader concept than GDP. The net foreign income is the difference between the factor of income earned by our residents from foreign countries and the factor of income earned by the foreigners from native country.

Hence, GNP = GDP + Net foreign income

Or, GNP = C + I + G + (X – M)

Where, C = Consumption expenditure

I = Investment expenditure

G = Government expenditure

X = Total export earnings

M = Total imports expenses, and

X – M = Net income from abroad

iii) Net National Product (NNP)

In the production process, certain amount of fixed capital is used up. This is called depreciation of fixed capital or consumption of fixed capital. By deducting the value of depreciation from the value of GNP in a year, we get another measure of output called Net National Product.

Hence, NNP = GNP – Depreciation

Further, NNP at market price = GNP at market price – Depreciation

iv) National Income (NI)

National income is called national income at factor cost because the national income is calculated on the basis of the remuneration of factors of production. Since National Income is the result of the joint efforts of factors of production, it is distributed among the factors. The owners of labor, land, capital and entrepreneurs receive wage, rent, interest and profit respectively. Hence, national income is the sum of income received by factors of production. In other words, national income can be expressed as,

National Income (NI) = Net National Product + Subsidies – Indirect taxes

Or, NI = NNP + S – IT

Where, NNP = Net National Product,

S = Subsidies,

IT = Indirect taxes

v) Personal Income (PI)

Personal income is the sum of all income actually received by all individuals or households during a given year. However, all income earned by a person does not constitute personal income. It only refers to the income received by the individuals.

Hence, Personal Income (PI) = National income – Corporate income taxes – Undistributed profits – Social security contribution + Transfer payments.

vi) Disposable Income (DI)

The entire amount received by the individuals and households are not available for consumption expenditure because some part of the personal income should be paid to the government in the form of direct tax (income tax). Hence, the income remained after paying direct taxes from personal income is called disposable income.

Hence, Disposable Income (DI) = Personal Income (PI) – Direct taxes.

The total disposable income is not spent on consumption. Some part is saved. Thus,

DI = C + S

Where, C = Consumption expenditure,

S = Saving

vii) Per Capita Income

Per capita income of a country usually refers to the average earning or income of individuals in a particular year. It is obtained by dividing the national income of the country by the total population.

Hence, Per capita income = National Income / Total Population

Hence, per capita income of the people is useful to compare people’s standard of living in different countries.

Calculation of GDP, GNP, NNP, NI, PI and PDI

($ in million)

1. Gross Domestic Product (GDP)	440
Net Factor income from abroad	+ 41
2. Gross National Product (GNP)	481
Depreciation	- 20
3. Net National Product (NNP)	461
Net indirect taxes (indirect taxes - subsidies)	- 6
National Income(NI)	455
Corporate profit taxes, undistributed profits, and valuation adjustment	- 2
Social security contribution	- 3
Transfer payments to persons	+ 6
Personal interest income	+ 2
5. Personal Income (PI)	458
Personal taxes (direct taxes)	- 111
6. Personal Disposable Income (PDI)	347

Limitations and Assumptions of Acceleration Theory

The acceleration value may be considerably reduced as account of some practical limitations and assumptions:

No excess capacity: If there is already excess capacity in the consumer goods sector, a rise in demand for consumer goods will not lead to any induced investment or acceleration effects, because the increased demand may be met from the existing capital and machinery without producing additional capital goods. This will be a case of zero gross investment and is the typical case during the initial period of recovery phase of the trade cycle.
Surplus capacity: The operation of the principle depends upon the presumption that there is surplus capacity in the investment goods industries. If it were not so and no excess capacity existed in machine making industries, an increase in the derived demand for machines could not result in an increased supply of machines. Hence, the principle of acceleration depends upon very tough conditions that there shall be excess capacity in one industry (investment industry) but no excess capacity in other (consumer goods industries).
Capital output ratio: It is based on the assumption that there is a constant ratio of the output of consumer goods and capital equipment needed for their production. In reality thus ratio is not constant. Apart from the inventions and improvements in the technique of production, existing capital equipment may be worked more intensively. The capital output ratio also varies in different phases of the business cycle and does not remain constant.
Nature of demand: An increase in the demand for consumption goods must be more or less permanent in nature to have acceleration effects. A purely temporary increase in the demand for consumer goods will not lead to any addition in the capital goods. Durable capital goods are expensive and no producer will order capital goods that increases in demand in short level. This also shows that the acceleration is not based on merely technological factors but also no profit expectation.
Availability of resources: The working of acceleration principle is further impaired by the availability of resources and the ability of the machine making industry to produce more machines. In order that the increased demand for capital goods is followed by an increase in the production. There must be enough unemployed factors available for employment in the capital goods industries. This is possible only when there is widespread unemployment in the economy.
Elastic credit supply: The elastic supply of money and credit is another factor, which helps, in the smooth working of the acceleration principle. Whenever there is induced investment as a result of induced consumption, enough money and credit should be forthcoming for investment in investment goods industries. A scarcity of money and credit will raise the rate of interest and will make investment financed by borrowed funds easier. It is, therefore, essential that the rate of interest not be allowed to rise and that there is enough credit to allow for the acceleration effects to flow.

i) Investment Exceeding Saving

Let us assume saving investment equilibrium and also assume that the investment expenditure increases in the economy without an equal reduction in the consumption expenditure. This is a case of an excess of investment over saving. This excess of investment over saving may be possible by an expansion of money through credit creation by commercial banks or by the dis-hoarding of wealth by the people. This excessive investment increases the money income of the consumers due to increase employment resulting from increased investment. The consumers in turn spend more on consumer goods. It raises the prices of the consumer goods and the profits of the producers manufacturing consumer goods. They tend to increase their investment in anticipation of still higher profits. This cumulative process of expanding investment continues.

During depression, as a result of the expansion of investment employment of idle resources and money income for the people will increase. There will be some increase in prices but it will not be a steep rise because of a simultaneous increase in output. Once full employment is reached, the prices will rise in proportion to the rise in money supply.

But the saving-investment disequilibrium will not last long. When income rises as result of investment exceeding saving, saving being a function of income also starts rising. This reduces the gap between investment and saving and once again saving-investment equality is attained. This new equilibrium is at higher levels of income, output, employment and prices.

Investment Exceeding Saving

In figure, original saving-investment equilibrium is at E where investment curve (II) intersects the saving curve (SS). The equilibrium level of income is OY. As a result of increase in investment, the investment curve shifts upward to I'I' which intersects the saving curved at the new equilibrium point E1. OY1 is the new and higher equilibrium level of income.

ii) Saving Exceeding Investment

The excess of saving over investment may arise in two ways:

i) As pointed by Keynes, saving function remaining unchanged, the excess of saving over investment is the result of a sudden fall in the marginal efficiency of capital unaccompanied by proportional fall in the rate of interest. This generally happens during the boom period of the trade cycle. The excessive saving results in a decline in the expenditure on consumer and investment goods. The demand and the prices of the consumer goods fall. The actual profits of the producers fall short of the expected profits. Consequently, they reduce the employment, output and income. But, when income falls, saving being a function of income, also falls. This reduces the gap between saving and investment and new saving investment equilibrium is reached at lower levels of output and prices.

Saving Exceeding Investment

In figure, original saving-investment equilibrium is at point E with an income of OY. Excess of saving over investment is depicted by a shift in investment curve form II and I’I’. The new equilibrium is at point E1 with a reduced income of OY1.

ii) Investment function remaining unchanged, the excess of saving over investment is the result of an upward shift of saving function. In this case too, the new equilibrium will be at a lower level of income and prices. In figure (B), the original saving-investment equilibrium is at point E with an income of OY. Excess of saving over investment is represented by a shift in saving curve from SS to S’S’. Then now equilibrium is established at point E1 with a reduced income of OY1. Thus, whenever saving exceeds investment, it initiates a process of cumulative decline in income prices and economic activity. It is in this sense that Keynes regarded saving as a private virtue but a public vice.

According to Keynes, saving function remains more or less stable in the short period. Hence, the business fluctuations in the economy are largely due to investment. An increase in investment leads to a rise in income, output, employment and prices and a decrease in investment causes a fall in the income, output, employment and prices.

In summary, saving investment theory of money, it is the inequality between saving and investment that causes price fluctuations (or the changes in the value of money) through changes in the level of income:

If saving and investment are in equilibrium (S = I), the price level will tend to be stable.
If investment exceeds saving, the price level will rise.
If saving exceeds investment, the price level will fall. Thus, contrary to the quantity theory of money, the income theory of money emphasizes those fluctuations in the price level are due to the changes in income rather than in the quantity of money.

Theoretical Differences

The monetarists emphasize the role of money in explaining short changes in national income. Friedman and Schwartz have shown that changes in the money supply cause changes in national income. The monetarists believe that all recessions and depressions are caused by severe contraction of money and credit, and booms and inflation by excessive increases in the money supply.

The Keynesians reject the monetarist view that changes in national income are caused solely by changes in money supply. They hold that changes in national income cause changes in the supply of money. The moderate Keynesians still believe such as monetarists that hyperinflation is caused by excessive money supply. On the other hand, the extreme Keynesians hold that non-monetary factors such as investment cause depressions and booms.

Monetarist View

As pointed by the monetarists, the money supply is the ‘dominant though not exclusive’ determinant of both the level of output and prices in the short-run, and of the level of prices in the long run. The long run level of output is not influenced by the money supply. It is dependent on such real factors as technology and the quantity and quality of productive resources. Although factors other than the money supply affect the level of output, employment and prices in the short-run, yet their effects are subordinate to that of the money supply.

A change in the money supply will inevitably affect the price level and output in the short run. But, in the long run, the effect of change in the money supply will be entirely on the price level because the economy is near full employment in that time period and the increase in national income will consist mainly of higher prices. Hence changes in the money supply affect national income directly. This is due to the assumption that the velocity of circulation of money is stable.

The monetarists hold that the rate of interest plays no part in determining the demand for money. The demand for money is the transactions demand for money, which is determined by the level of income. The monetarists believed that the money supply is also not influenced by interest rates. This insensitiveness of both demands for and supply of money is based on the quantity of money. The simplest quantity equation is MV = PQ, where M is the quantity of money, V is its velocity, Q is the number of physical transactions, and P is the price level. Taking PQ = Y, where Y is the national income, the quantity equation becomes MV = Y. As V remains constant, changes in M cause changes in Y.

The monetarist is based on the belief that money is a good substitute for all types of assets such as securities, houses, durable consumer goods etc. Prof. Friedman findings show a ‘stable money demand function’, which implies the demand for money is a stable function of peoples’ income. In other words, the amount of money that the people want to hold is related in a fixed way to their income. If the central bank increases the money supply, it affects interest rates on these different ways:

i) There is the liquidity effect, which causes a very short run reduction in the interest rates. As a result, people will sell securities and their holdings of money will increase. Therefore, they will spend their excess money balances on financial assets on durable consumer goods. This increase in aggregate expenditure on assets and goods will tend to rise output, employment and income. It is called output effect, which will tend to rise in interest rates because of the rise in output and demand for money resulting from the liquidity effect.

ii) There is the price expectations effect, which occurs due to the expectations of lenders that inflation will continue. They will demand higher interest rates in order to cover the expected inflation rate.

Thus, with the short run liquidity effect bringing a downward pressure on interest rates and both the output and price expectations effects bringing an upward pressure on them, the combined effect will be an increase in interest rates. It will, in turn, discourage investment, and reduce output and employment.

Keynesian View

The Keynesian hold just the opposite views to monetarists about the demand for and supply of money and the aggregate expenditure. Both the demand for and supply of money are highly interest elastic while the aggregate expenditure is not.

They consider the supply of money to be fixed in the short run by monetary authorities. The demand for money also called the liquidity preference is the desire to hold cash. There are three motives on the part of the people to hold cash: transactions, precautionary and speculative demand for money. Money held for transactions and precautionary motives is a function of level of income, and for the speculative motive, it is a function of interest rate.

To the Keynesians, it is expected about changes in both prices or in the market rate of interest that determine the speculative demand for money. The speculative demand for money is a decreasing function of the rate of interest. The higher the rate of interest, the lower the speculative demand for money, and vice-versa. But at a very low interest rate, the speculative demand for money becomes perfectly elastic.

On the whole, given the level of national income, the demand for money is a decreasing function of the interest rate. The Keynesians believe that money and financial assets is to be good substitutes for each other. They are highly liquid and yield interest. So, even small changes in interest rates lead to substitution between money and financial assets. A small fall in the interest rate will mean a rise in the price of securities, which will induce people to sell securities and hold more money. The reverse will be case in the event of a small rise in the rate of interest. Thus, the demand for money is highly interest-elastic under Keynesianism.

The Keynesians believe in the existence of unemployment equilibrium. This implies that an increase in money supply can bring about permanent increase in the level of output. The ultimate influence of money supply on the price level depends upon its influence on aggregate demand and the elasticity of the aggregate output.

The Keynesian chain of causation between changes in the quantity of money and in prices is an indirect one through the rate of interest. So, when the quantity of money is increased, its first impact is on the rate of interest which tends to fall. Given the marginal efficiency of capital, a fall in the rate of interest will increase the volume of investment. The increased investment will raise effective demand through the multiplier effect thereby increasing income, output and employment. Since the supply of factors of production is perfectly elastic in a situation of unemployment, wage and non-wage factors are available at constant rate of remuneration. There being constant returns to scale, prices do not rise with the increase in output so long as there is any unemployment. Under the circumstances, output and employment will increase in the same proportion as the quantity of money.

But 'once full employment is reached, output ceases to respond at all to changes in the supply of money and so in effective demand. The elasticity of supply of output in response to change in the supply, which is infinite as long as there was unemployment, falls to zero. The entire effect of changes in the supply of money is exerted on prices, which rise in exact proportion with the increase in effective demand’. Thus, so long as there is unemployment, output will be no change in prices; and when there is full employment, prices will change in the same proportion as the quantity of money.

In the Keynesian transmission mechanism, changes in the money supply affect aggregate expenditure and national income indirectly by changes in interest rate. Suppose the money is increased, it lowers the interest rate which, in turn, increases investment and expenditure thereby supply are transmitted into the level of income: for example, an increase in the money supply causes people to spend their excess holdings of money on financial assets. This means, an increase in the demand for such assets and a rise in their prices. Rise in the prices of assets (securities), brings down the interest rates which, in turn, increase aggregate expenditure, investment and hence income. Thus, according to the Keynesian view, a change in the money supply can only affect aggregate spending and national income first through changes in interest rates, and then only if the aggregate spending is sensitive to interest rate changes.

Policy Differences

Another point of differences between the monetarists and the Keynesians is over the policy prescriptions. According to the monetarists, monetary policy has a greater influence on economic activity than fiscal policy, and fiscal policy is important only by making changes in the money supply. On the other hand, the Keynesians emphasize the importance of both fiscal and monetary policy in influencing the economy but they attach more importance to the former than to the later. First, we study the monetarist view on monetary and fiscal policy and then the Keynesian view.

Monetarist View

The monetarists hold that changes in the money supply have a direct influence on aggregate expenditure and thus on income. It can be analyzed an expansionary monetary policy followed by monetarists. To begin, suppose the central bank purchased securities in the open market. It raises the price of securities and lowers the rate of interest. People will, therefore, start selling securities and hold more money. People spend their excess money balances on financial assets and durable consumer goods. Other attracted by low interest rates borrow from banks for expenditure on houses, durable consumer goods, plants and equipment, etc. The forces tend to increase aggregate expenditure and income.

Keynesian View

In contrast to the monetarists, the Keynesians regard monetary policy relatively less effective because of relative interest inelasticity in aggregate expenditure. In the expansionary monetary policy, the central bank purchases securities in the open market. As a result, the price of securities rises and the interest rate falls. People will therefore, start selling securities in order to hold more money. As the demand for money is highly interest elastic in the Keynesian system, even a small fall in the rate of interest will induce people to sell securities and hold more money.

The controversy between Keynesianism and monetarism can be list out as follows:

Differences	Monetarists	Keynesians
(i) Role of Money	Only money matters. In other words, only changes in money supply influence the level of nominal income.	Money does not matter. In other words, a change in money supply will not change nominal income; it will simply increase the idle cash balance for speculative motive.
(ii) Rate of Interest	Money supply alone should be watched closely because a change in money supply changes aggregates demand directly and not through interest rates.	Interest rates are important but the money supply is not. Interest rates affect planned investment and thus national output.
(iii) Monetary Policy	Use monetary policy rule for stabilization.	Monetary policy is seldom appropriate.
(iv) Fiscal Policy	Fiscal policy is absolutely ineffective because it has no effect on nominal aggregate demand.	Fiscal policy is powerful tool, as compared to monetary policy.
(v) Relationship between Money Supply and Price Level	There is direct and proportional relation between money supply and price level. So, MV = PQ	There will be some relationship between price level and money supply through investment and return but not directly proportional relation.
(vi) Economic Growth	Money supply, demand of money and interest rate can play major role for sustainable economic growth.	Government intervention promotes the economic activities because at that condition private sectors are not invested. So, government should promote economic activities.

Similarly, the monetarists advocated that the role of central bank is important whereas Keynesians believed that demand for resources, factor employment, and increase in income then effective demand which increase investment.

Forms of Operating Control

Operating controls may be in various forms:

i) Control over environmental pollution

Environmental pollution is a negative externality created by private business firms involved in production activities. Government uses its different tools to correct the negative externality. For example, government sets limit for automobile emissions, fuel efficiency and safety standards to control environmental pollution. The government of Nepal, for example, has introduced Nepal Vehicle Mass Emission Standards 1999 (2056 B.S.) to control pollution created by vehicles. The role of the Environmental Protection Agency (EPA) of the US Federal Government is to control pollution.

ii) Control on food products

Firms involved in the production and sales of food products, drugs and other substances could harm consumers by producing and/or supplying low-quality or substandard items. So, it is essential to regulate such production activities. Government regulates such activities through food and drug acts. The act designed by the government to control the quality of Food forces the private business to maintain the standard mentioned in the act.

For example, The Pure Food and Drug Act of 1906 in the US sets rules of conduct governing producers in their relationships with consumers. It prohibits the sale of adulterated and misbranded foods and drugs, requires net weights and ingredients of products to be specified on their containers, establishes quality standards which must be stated on labels of packaged foods and prohibits deceiving claims on patent-medicine labels. These measures are designed to prevent false activities by producers and to increase the public’s confidence in the integrity of the market system.

iii) Industrial work conditions

Government controls the working environment of a factory by using labor laws and health regulation including the provisions relating noise levels, toxious gases and chemicals, and safety standards. For example, The Occupational Safety and Health Administration (OSHA) agency of the US Federal government requires that employers inform workers about risks and mandates firms to reduce risks.

iv) Wage and price control

Government also regulates wage through minimum wage law and price is also regulate to control inflation. Wage and price control policy of the government limits the freedom of the firm to determine wage and price.

v) Control in the operation of financial institutions

Government attempts to control the loan advancing activities of commercial banks by setting the minimum required reserved ratio (RRR) under which every commercial bank is required to keep certain percent of the deposit in cash. Banks cannot advance loan by undermining that RRR.

vi) Control in transportation

Government also regulates the operation of airplanes and vehicles. For example, the government fixes the limit of the weight of luggage / baggage in airplanes, (normally up to 15 kg, it is free and beyond that passengers have to pay additional charges), prohibition on carrying passengers on the top part of passenger buses, the Federal Aviation Administration (FAA) of the US sets standards for airline safety whereas The National Highway and Traffic Safety Administration (NHTSA) monitors risks and sets standards for automobiles and highways.

Cost and Benefits of Operating Controls

The question of who pays for such regulation is seldom answered by simply referring to the point of tax collection or point of the incidence of tax burden. This economic cost of regulation is often transferred to consumers or suppliers, as determined by the relative price elasticities of the demand and supply functions.

We can discuss the benefits of much operating controls in terms of information and risk. We know that there are externalities associated with information and risk. If every person who flew on an airplane had to have it checked for safety, the costs would be huge. It is much cheaper to have an agency like the Federal Aviation Administration (FAA) checks for airline safety. When the FAA sees a way to make a change in safety requirements that will reduce risk and thereby save lives, it has the authority to require that the airlines make these changes. Similarly, it would be costly for each consumer to check the accuracy of all advertising claims, or to test the efficacy of a new drug. By giving the Food and Drug Administration (FDA) of the US Federal government, the responsibility for testing new drugs, the public saves considerably on time and effort.

To be sure, without the government, private organizations would probably keep going to provide testing and information about products. Consumers Union is one such organization and many industries in the US economy have private watchdog organizations. But because of information externalities, the private actions would probably fall short of the efficient level.

The benefits from providing information about risks must be considered in light of the costs. The FDA might hold back a new drug for testing to reduce risks but this is costly to the people whose lives could be saved if the drug were approved. The building code requirements for a construction site might raise the cost of construction significantly. Frequently, these costs are not visible. No one knows that an illness might have been prevented with a new drug, but everyone knows when a faulty new drug causes severe illness or death.

The actions of the FDA, Occupational Safety and Health Administration (OSHA), and other agencies of the US Federal government involved in social regulation are frequently criticized because of the costs they impose on firms and consumers. Very angry letters and critical editorials about the costs are common. It is very difficult to estimate the costs, but some economists have tried. It has been reported that the cost estimate of implementing the operating control measures in the US economy ranges from around 3 to 5 percent of GDP per year for all programs. On the other side, the programs are popular, and they clearly do reduce risks and provide information.

Ultimately, the degree of government intervention will be decided in the give and take of the political process. But careful cost-benefit analysis on a program-by-program basis, as urged by many economists, would help in the decision-making process.

Pages

Various concepts of National Income

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Limitations and Assumptions of Acceleration Theory

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i) Investment Exceeding Saving

ii) Saving Exceeding Investment

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Theoretical Differences

Monetarist View

Keynesian View

Policy Differences

Monetarist View

Keynesian View

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