According to Keynes, business cycle is caused by variations in the rate of investment caused by fluctuations in the Marginal Efficiency of Capital. The term 'marginal efficiency of capital' means the expected profits from new investments. Entrepreneurial activity depends upon profit expectations. In his business cycle theory, Keynes assigns the major role to expectations. Business cycles are periodic fluctuations of [...]
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 [...]