TWO SECTOR AND FOUR SECTOR ECONOMY

Two and Four Sector economy




1 Dr.S.Balambigai ASP/ECE

, Assumptions of Income-
expenditure Model




2 Dr.S.Balambigai ASP/ECE

, Assumptions of income-expenditure model
(or elementary Keynesian model)
The amount of resources and the state of technology
remain unchanged, i.e., Yf is a constant.
There exists an unemployment of resources. The model
is to find out the determinants of equilibrium GNP and
the ways to eliminate unemployment.
No indirect taxes, subsidies, depreciation or net factor
income from abroad, i.e., Y = GDP = GNP.
The interest rate and the price level are fixed. So
nominal variables = real variables and nom. r = real r.
3 Dr.S.Balambigai ASP/ECE