ABSTRACT
Having described the general nature of national income accounts, we are now ready to analyse the basic determination of equilibrium income, that is, the why and how of national income being what it actually is without a tendency to rise or to fall. We shall make use of Keynes’ ‘Principle of Effective Demand’ with such modifications as are helpful for a clearer understanding. There are two alternative ways to demonstrate the determination of equilibrium income. One way is to explain it in terms of the interaction of aggregate income and aggregate expenditure, which is Keynes’ own method. 1 The other is to explain it in terms of the interplay of saving and investment, which alternative has been popularized by Keynes’ followers. 2 These methods of analysis will be found to come to the same thing, though their ‘comparative advantage’ will have to be specified in due course.
