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Expectations played a major role in Keynes' theory of the determination of aggregat 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 miarket econornies are subject to fluctuations.
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Long Run Average Cost (or LAC) -Constant Returns to Scale If the input is doubled, the output will double and average cost is constant at all the levels of output.
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