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Keynesian Theory has long been dismissed. The big problem with economics is that the theory can not be tested as the parameters can never be precisely repeated.
The average propensity to consume will generally increase as income increases.
A person will generally buy a 'better' brand of anything with an increase in income. eg: car, boat, golf clubs, steak, wine, scotch, linen, you get the picture.
Keynesian Theory often suggested an "ideal economy" with rational decisions.
An increase in income should lead to an increase in investment or saving and thus suggest a decrease in the propensity to consume. However, there is no test available to suggest that the increasing investment will not also lead to an increase in consumption.

2006-07-21 20:58:33 · answer #1 · answered by hubertxiv 3 · 0 0

Yes Khan

This Kenesian Theory very well helped U.S. to come out of recession in 1969.

But now equations are changed and so the butts.

2006-07-22 06:42:38 · answer #2 · answered by Swayam Prakash 3 · 0 0

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