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Marshallian Contribution to Keynesian Argument I cut out the parts of the paper that Hei

The first problem was a failure to consider the effects of money on prices. This deficiency was corrected by Alfred Marshall in his formulation of economic theory. The second problem was the absence of consistent emphasis the role of expectations in economic decisions. More than any economic theorist before him, Keynes corrected this situation by incorporating the concept of expectations in a major way into much of his theory.

Keynes recognized that expectations played a major role in consumption decisions. In this context, Keynes (1936, p. 210) held that a decision to save (to forego current consumption) may not be assumed to be accompanied by an expectation of future consumption. Thus, according to Keynes, an act of saving will depress the price of consumption goods, and may also depress the marginal efficiency of existing capital. "In this event it may reduce present investmentdemand as well as present consumptiondemand" (Keynes, 1936, p. 210). Through this reasoning, Keynes recognized that expectations were important in making investment decisions. Expectations, thus, played a major role in Keynes' concept of the marginal efficiency of capital. More so than Marshall, Keynes (1936, pp. 150151) believed that aggregate investment is conditioned largely by profit expectations. While considering the role of expectations, Marshall (1920, pp. 302315) often tended to associate prices, costs, and economic decisions wit

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Marshallian Contribution to Keynesian Argument I cut out the parts of the paper that Hei. (1969, December 31). In LotsofEssays.com. Retrieved 12:52, October 24, 2014, from http://www.collegetermpapers.com/viewpaper/10521.html
 
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