We prove a generating function formula for the Betti numbers of Nakajima quiver varieties. We prove that it is a q-deformation of the Weyl-Kac character formula. In particular this implies that the constant term of the polynomial counting the number of absolutely indecomposable representations of a quiver equals the multiplicity of a a certain weight in the corresponding Kac-Moody algebra, which was conjectured by Kac in 1982.
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