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