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Unformatted text preview: they expect. But in reality what falls in their hand is the total expenditure or ADP that consumers are prepared to undertake. If ADP value satisfies ASP value then the producers continue to produce as before and employ as many workers as before. But if ADP falls short of the ASP then producers’ expectations are not fully satisfied and they are induced to reduce output and demand for labor. This causes unemployment. Therefore the cause of unemployment has been detected. It is then deficiency in the effective demand that is the culprit which results in unemployment. Let’s illustrate this with the help of a figure. It will also help to draw a distinction between classical partial equilibrium and Keynes’ general equilibrium analysis ....
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- Fall '10
- Supply And Demand, effective demand