Question

Political Economy Question: Explain the tendency for underconsumption crisis. Include in your answer, the paradox of...

Political Economy Question:

Explain the tendency for underconsumption crisis. Include in your answer, the paradox of thrift, the absolute income hypothesis, the rising rate of exploitation and how these effect the tendency for the rate of growth of output to exceed the rate of growth of consumption.

Homework Answers

Answer #1
  • Underconsumption crisis refers to the crisis of fall in aggregate demand. Fall in aggregate demand causes fall in economic activities and resultant fall in employment opportunities.
  • Paradox of thrift also says that when saving is raised by slashing down consumption, the aggregate demand fall and which leads to fall in income and employments in economies.
  • Similarly, rising rate of exploitation means labor or production resources are not paid according to their contribution which means now their income would not be sufficient to consume all produced goods and services. it was popularised by karl marx. Thus growth rate will outpace the growth rate of consumption. it will also result into mass unemployment owing to fall in demand.

Solution:

Expansionary fiscal and monetary policies are pursued to deal with such problem.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
According to this question: Explain the tendency for underconsumption crisis. Include in your answer, the paradox...
According to this question: Explain the tendency for underconsumption crisis. Include in your answer, the paradox of thrift, the absolute income hypothesis, the rising rate of exploitation and how these effect the tendency for the rate of growth of output to exceed the rate of growth of consumption. The Political Economy Question is: What role did the hours of work per year of US families play in this period?
Question: Explain whether the following statements are TRUE or FALSE. You should explain your answer in...
Question: Explain whether the following statements are TRUE or FALSE. You should explain your answer in each case and show on a graph. a)   (……………..) If wages adjust fully to price increases in the long run, fiscal policy will have no effect on output. b)   (...................) A decrease in government spending and an increase in costs lead to a decrease in the price level certainly. c)   (……………..) An earthquake destroyed a small economy. As a result, the government decided to...
Suppose that a small open economy suddenly experiences a violent political upheaval. Explain what will happen...
Suppose that a small open economy suddenly experiences a violent political upheaval. Explain what will happen to its interest rate, equilibrium nominal exchange rate, and output. Use a graph to illustrate your answer.
Answer true,false,or uncertain.Please briefly explain your answer. a) —the unemployment rate is decreasing,employment is increasing. Answer...
Answer true,false,or uncertain.Please briefly explain your answer. a) —the unemployment rate is decreasing,employment is increasing. Answer true,false,or uncertain.Please briefly explain your answer. b) Consider a standard Keynesian model but with two types of consumers,Type A who have low marginal propensities to consume and Type B who have high marginal propensities to consume. —An economy with relatively more Type A consumers is more vulnerable to a negative shock to investment demand. Answer true,false,or uncertain. Please briefly explain your answer. c) Consider...
Answer the following question: (a) Using the Keynesian Cross, explain how a tax cut, ∆T, affects...
Answer the following question: (a) Using the Keynesian Cross, explain how a tax cut, ∆T, affects nation income. Using the appropriate multiplier, what is the magnitude of the change in national income, ∆Y . What is the change in consumption and the change in investment? Explain. (Hint: for investment, what are we treating as exogenous in this model?) (b) Use the IS-LM model to analyze the effect of the policy in part (a). How does the change in national income...
Assuming perfect capital mobility and flexible exchange rates, explain the impact on the Irish economy of...
Assuming perfect capital mobility and flexible exchange rates, explain the impact on the Irish economy of a decrease in interest rates in the U.S. In your answer, clearly indicate the effect on income, rate of interest, balance of payments. (Show your answer with the help of an IS-LM-BP diagram and explain the mechanisms. Consider Ireland a small open economy with flexible exchange rates. b) Are Monetary and Fiscal policies effective in the case of question (a)? Explain with graphs
Question 1 By relying on the IS LM Model explain what will be the effect of...
Question 1 By relying on the IS LM Model explain what will be the effect of a tax cut policy on the equilibrium level of income. Explain in detail the different steps, how does this policy impact the investment? Question 2 Keynesian economics assume that prices are sticky (they do not change) in the short run. It is an assumption shared by classical economics. Explain briefly what are the characteristics of classical economists and according to them what drives the...
Answer 3 of the following 5 questions based upon media quotations. Each question will be graded...
Answer 3 of the following 5 questions based upon media quotations. Each question will be graded out of 5. Your grade will be based upon your explanation in support of your answer. 1. “But economists believe that one of the most important sources of bias in the Consumer Price Index as a measure of the cost of living occurs when consumers shift their buying patterns in response to a change in relative prices…” What is the nature of the bias...
Question #1: The Basic Solow Model Consider an economy in which the population grows at the...
Question #1: The Basic Solow Model Consider an economy in which the population grows at the rate of 1% per year. The per worker production function is y = k6, where y is output per worker and k is capital per worker. The depreciation rate of capital is 14% per year. Assume that households consume 90% of their income and save the remaining 10% of their income. (a) Calculate the following steady-state values of (i) capital per worker (ii) output...
Question 1: We have the following information about an economy. Use this information to answer the...
Question 1: We have the following information about an economy. Use this information to answer the questions below. Table 1: Number of Cars and Bushels of Wheat Possible for an Economy to Produce Point Number of Cars (in 10,000s) Bushels of Wheat (in 100,000s) A 0 700 B 60 630 C 120 530 D 180 400 E 240 220 F 300 0 Use the information in the table to graph a production possibilities curve for this economy. Put cars on...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT