Aggregate economic activity levels

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In the General Theory Keynes proposes two key and connected theoretical innovations: 1) aggregate economic activity levels are demand-determined (the Principle of Effective Demand) rather than supply-side determined; and 2) the general level of interest rates is determined by monetary forces and convention rather than 'real' forces. Outline and critically appraise how the latter theory of interest rates is facilitated by the manner of saving-investment equilibration in the Principle of Effective Demand.

Reference no: EM133129026

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