In this article we will discuss about the over-investment theory of business cycle. Also learn about the criticisms of the theory. A major variant of the pure monetary theory of the business cycle is the over-investment theory developed by Prof. V. Hayek. According to him, the over-issue of bank credit at artificially low interest rates is responsible for causing fluctuations [...]
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 [...]