Question

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?

Answer 1

Under consumption 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 saying raised by saving down consumption,the aggregate demand fall and which leads to fall in income and employments in economies.similarly,rising rate of exploitation means labour or production resources are not paid according to their contribuition which means noe their income would not be sufficient to consume all produced goods and services.thus growth rate will out pace the growth rate of consumption.it will also result into mass owing to fall in demand.

Impacts:

US families spending falls during this period.and further we find that US families also piles up.

Government must use expansionary fiscal policy by increasing and reducing taxes drive up aggregate demand in economy.