Economics made easy
Economics is all about demand and supply. If the two don't match together then problems arise. The slow down of the Indian economy nowadays is the result of the deficiency of demand in relation to supply. People don't have sufficient income to spend on the goods and services produced so far.This problem can only be solved by raising the level of income either by creating more employment or leaving sufficient income in the hands of people by ratonalising the tax structure or through the effective use of monetary and fiscal policies. The Keyne sian theory says that the level of income in the economy depends on effective demand which is determined by aggregate demand (AD) and aggregate supply(AS). The aggregate demand is composed of consumption demand and investment demand. The consumption demand itself depends on the income and marginal propensity to consume (mpc)which is the ratio of change in consumption to change in income.The investment demand depends on marginal efficien