Assumptions of keynes

Assumptions of keynes:

Keynes made the assumption to describe income determination in a simple manner a follows:

1. There are merely two sectors that is, consumers ( C ) and firms ( I ).

2. Government persuade on the economy is nil. In another words government expenses (G) is zero. Since there is no taxation, all personal income will become not reusable income.

3. The economy is a closed one devoid of any influence of the foreign trade (X-M) i.e.,   X-M is zero.

4. Salary and prices stay constant.

5. There are jobless resources and therefore less than full employment symmetry prevails.

6. There is no disparity in the rate of interest.

7. Investment is autonomous and it has no consequence on price level or rate of interest.

8. The consumption expenses are stable.

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