Unit IV: Determination of Income and Employment

• Aggregate demand, aggregate supply, and their components

• Propensity to consume and propensity to save (average and marginal)

• Meaning of involuntary unemployment and full employment • Determination of income and employment: two-sector model

• Concept of investment multiplier and its working

• Problems of excess and deficient demand

• Measures to correct excess and deficient demand – availability of credit, change in government spending