KEYNES THEORY
1.The government should take a role with government spending
2.Do not rely on supply side, but must increase effective demand through consumption and investment.
3.Keynes opposes the opinion of the classical theory which assumes that economy is always in a state of full employment, according to it could be under employment or over employment, because the behavior of people saving is not the same as the behavior of people investing.

Consumption Curve


A person's spending on consumption and savings is influenced by his income. The greater income a person will be the more levels of consumption as well, and savings rates will be increased. and vice versa if the income level of a person is smaller, then all income is used for consumption so that the savings rate is zero.

National Income In Equilibrium

Y = C + I + G + (X-M)
Y = Natoinal Income
C = Consumption function
I = Investment
G = Government Expenditure
X = Export
M = Import

SUPPLY AND DEMAND OF MONEY
—Motives for holding money:
1) Transaction motive
2) Precautionary motive
3) Speculative motive








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