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Keynesian Economics

Keynesian Economics. According to John Maynard Keynes: in the short-run, the level of GDP is determined primarily by demand. Keynesian Consumption Function. The relationship between consumer spending and income, in the short-run, has two parts: C = C a + by C = Consumption Spending;

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Keynesian Economics

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  1. Keynesian Economics According to John Maynard Keynes: in the short-run, the level of GDP is determined primarily by demand.

  2. Keynesian Consumption Function The relationship between consumer spending and income, in the short-run, has two parts:C = Ca + by • C = Consumption Spending; • Ca = Autonomous Consumption Spending; • b = Marginal Propensity to Consume; and • y = Level of Income.

  3. Keynesian Saving Function The relationship between the level of saving and the level of income, in the short-run, is: S = - Ca + (1 - b)y • S = Consumer Saving; • Ca = Autonomous Consumption Spending; • 1 - b = Marginal Propensity to Save; and • y = Level of Income.

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