Unformatted text preview: law of marginal propensity to consume (MPC), multiplier operations, investment function and marginal efficiency of capital (MEC), identity between savings and investment , and his pure monetary liquidity preference theory of interest accompanied by speculative motive for demand for money are some of his new contributions. Keynes denied the classical belief that the free enterprise system is a self regulating one and asserted that such a system requires periodic intervention of the public authority to avoid fluctuations and instability in economic activities . Besides, Keynes replaced the classical partial equilibrium by a more general equilibrium to ensure the full employment level of output and employment. Keynes was building an entirely new structure of economic analysis to study and redress the problem of unemployment . It was therefore essential for him to bring out weaknesses and inadequacies of the classical approach to the problem of unemployment ....
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- Fall '10
- Macroeconomics, Keynesian economics, Lord John Maynard Keynes