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THE KEYNESIAN THEORY OF CONSUMPTION FUNCTION
The theory was developed during the Great Depression which plagued Europe and America. During this time, there was excess capacity and idle resources and no effective demand i.e. people were unemployed and had no purchasing power. The determination of aggregate demand, then, was of crucial significance in Keynes analysis.
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THE DETERMINATION OF EQUILIBRIUM NATIONAL INCOME National income is said to be in equilibrium when there is no tendency for it either to increase or for it to decrease. The a
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