Keynes’ General Theory of Employment, Interest and Money Re-Stated

Abstract

We dealt with how economy determines its Employment and Income . We also dealt with: 1) the propensity to consume , and 2) the marginal efficiency of capital - MEC , which is determined by the long - term expectations of the enterprises about the prospective yields of their capital assets, by the state of confidence on them, by the level of their prospective yields and by the lending Rate of Interest. We defined the supply & the demand for Money and the Money Wage . We showed how New Investment is determined by the MEC; we assumed that the money wage is determined by bargains between labor & enterprises. We accepted that the Supply of Money is decided by the Central Bank and that the MEC, moreover, depends on Employment. We assumed that to any level of Employment corresponds one level of Income, not necessarily that of the full employment . We also took the following factors of the economy as given , but not as c onstant 1 : skills; labor’s quantity; equipment & its quality; techniques; the degree of competition; consumers’ tastes and habits; labor’s sources of disutility; the social structure; the distribution of national Income; the supervision of labor & of its organizing.