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KEYNES' THEORY AND EXPECTATIONS:
Expectations played a major role in Keynes' theory of the determination of aggregate output and employment in market economies in the short run. Expectations about future yields on investment projects underlie 'the marginal efficiency of capital' schedule. However, the volatile nature of these expectations plays a major role in explaining why investment expenditure and therefore output and employment in market economies are subject to fluctuations.
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THEORY OF REVEALED PREFERENCE: If consumer's taste and preferences do not change, then observation of her market behaviour or, actual act of choice between the commodity sets
What is a negative externality?
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