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 [...]
Show that the simultaneous operation of the multiplier and accelerator can cause income Auctions. Business conditions never remain unchanged. Prosperity may be followed by depression or a crash. Economic expansion yields place to recession, with consequent fall in national output or GNP, employment, and real incomes. Prices and profits may fall. People are thrown out of jobs and idle capacity [...]
The below mentioned article provides a note on super-multiplier. The term 'super-multiplier' was first coined by J.R. Hicks in his business cycle theory. The object was to show the relationship between change in induced investment and the corresponding change in income. To be more specific, it indicates the ratio between the two changes, i.e., in investment and in equilibrium output. [...]