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Lectures on John Maynard Keynes’ General Theory of Employment, Interest and Money (6): Chapters 8, 9 and 10: Keynes’ Theory of Consumer Behaviour

Brian Ferguson

No 1311, Working Papers from University of Guelph, Department of Economics and Finance

Abstract: Chapters 8, 9 and 10 set out Keynes’ theory of consumer behavior. Chapter 8 is entitled The Propensity to Consume: I. The Objective Factors, Chapter 9 is The Propensity to Consume: II. The Subjective Factors, and Chapter 10 is The Marginal Propensity to Consume and the Multiplier. Contrary to the widely held belief, Keynes saw the consumer as an intertemporally optimizing agent, in a manner which is quite consistent with Frank Ramsey’s model of intertemporal saving behavior and with modern theories of the behavior of the optimizing consumer. While he did conclude that in the short run income would be the dominant factor underlying consumer behavior, this was an empirical judgement, not simply an assumption about fundamental psychological propensities. Chapter 10 formally introduces the marginal propensity to consume and the multiplier.

Keywords: Keynes; General Theory; Keynesian Economics; Classical Economics; Propensity to Consume; Time Preference; Interest Rate; Bequest Motive; Multiplier; Burying bottles of Banknotes. (search for similar items in EconPapers)
JEL-codes: B10 B12 B13 B22 B31 E12 N12 N14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-hpe
Date: 2013
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