In this article we will discuss about the role of Aggregate Demand (AD) and Aggregate Supply (AS) in the Keynesian Model, explained with the help of a suitable diagram. In the Keynesian model an important role is played by aggregate demand, which consists of four components. First, there is household consumption, the main component of aggregate demand. Secondly, there is [...]
Get the answer of: What is the Business Cycle? Business (trade) cycles refer to regular oscillations in the level of business activity over a period of years, which occurs when economic activity speeds up or slows down. In fact, business cycles and unemployment reflect unavoidable features of a market economy. The term 'Business Cycle or Trade Cycle' is used to [...]
In this article we will discuss about the under-consumption theory of business cycle. On the basis of Marx's ideas writers on socialism such as Major Douglas and A. Hobson developed the over-saving or under-consumption theory of business cycles. In the opinion of Hobson, "The right proportion of saving to spending at any given time depends upon the present condition of [...]