Abstract
Keynes was adamant that the assumption of homogeneous output and capital in macroeconomic theory is inadmissable. His aggregate supply or Z function is a generalisation of Marshall's ordinary supply function to take account of heterogeneous output, and is an essential element of the principle of effective demand. The linear Z curve controversy can be attributed to Keynes's desire to demonstrate how his general monetary theory of value and output encompasses the special case of Classical theory, including the marginal productivity theorem. The infamous second footnote on pages 55-6 of The General Theory can thereby be fully resolved.
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