Regarded widely as the cornerstone of Keynesian thought, the book challenged the established classical economics and introduced important concepts such as the consumption function, the multiplier, the marginal efficiency of capital, the principle of effective demand and liquidity preference.
42.
The theoretical foundation of post-Keynesian economics is the principle of effective demand, that demand matters in the long as well as the short run, so that a competitive market economy has no natural or automatic tendency towards full employment.
43.
Rejecting Say's Law of Market, which states that'supply creates its own demand', he says that savings brings about a reduction in effective demand by reducing the ability of people to consume, in turn bringing a decline in profits and investments.
44.
Specifically, if an economic agent is constrained in one market, his supply or demand in another market may be changed from its unconstrained form, termed the " notional demand ", into a modified form known as " effective demand ".
45.
Malthus believes that an increase in the population does not provide a stimulus to economic growth as, it may not increase effective demand because workers often may be lacking in purchasing power due to the lack of demand of their labour.
46.
There is the ticket itself the money which forms the thing we call'effective demand' and there is something we call a price opposite to it . " Money is effective demand, and the means of reclaiming that money are prices and taxes.
47.
There is the ticket itself the money which forms the thing we call'effective demand' and there is something we call a price opposite to it . " Money is effective demand, and the means of reclaiming that money are prices and taxes.
48.
In an economy in which some markets fail to clear, such failure can influence the demand or supply behavior of affected participants in other markets, causing their effective demand or effective supply to differ from their notional ( unconstrained ) demand or supply.
49.
Such economic instability stems from a central contradiction : Wages are both a cost of production and an essential source of effective demand ( needs or desires backed with purchasing power ), resulting in deficiency of effective demand along with a growing interest in economic democracy.
50.
Such economic instability stems from a central contradiction : Wages are both a cost of production and an essential source of effective demand ( needs or desires backed with purchasing power ), resulting in deficiency of effective demand along with a growing interest in economic democracy.
