Keynes’s Theory of Business Cycle | Economics

According to Keynes, business cycle is caused by variations in the rate of investment caused by fluctuations in the Marginal Efficiency of Capital. The term 'marginal efficiency of capital' means the expected profits from new investments. Entrepreneurial activity depends upon profit expec­tations. In his business cycle theory, Keynes assigns the major role to expectations. Business cycles are periodic fluctuations of [...]