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 [...]
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 [...]
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 [...]