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Say’s Law of Market in Classical Theory of Employment Video Lecture | Macro Economics - B Com
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FAQs on Say’s Law of Market in Classical Theory of Employment Video Lecture - Macro Economics - B Com
| 1. What is Say's Law of Market in the Classical Theory of Employment? |  |
Ans. Say's Law of Market, proposed by French economist Jean-Baptiste Say, states that the production of goods and services generates its own demand. According to this law, the aggregate supply of goods and services in an economy creates an income for producers, which in turn becomes the purchasing power for consumers, leading to the demand for those goods and services. In simple terms, supply creates its own demand.
| 2. How does Say's Law of Market relate to the Classical Theory of Employment? | |
Ans. Say's Law of Market is a fundamental concept in the Classical Theory of Employment. According to the classical economists, including Say, the economy is self-regulating and tends toward full employment. They believed that if there is unemployment in the economy, it is due to inadequate supply or productive capacity, rather than insufficient demand. Say's Law supports this idea by asserting that supply creates its own demand, and any temporary imbalances in the economy will be corrected through adjustments in prices and wages.
| 3. What are the implications of Say's Law of Market in terms of economic policy? | |
Ans. Say's Law of Market has important implications for economic policy. Since it suggests that supply creates its own demand, it implies that government intervention to stimulate demand, such as through fiscal or monetary policies, may not be effective in achieving long-term economic growth and full employment. Instead, the focus should be on policies that promote an efficient supply-side of the economy, such as investments in infrastructure, education, and technology, to enhance productivity and expand the productive capacity.
| 4. Is Say's Law of Market universally accepted in economics? | |
Ans. Say's Law of Market has been a subject of debate among economists. While classical economists strongly supported it, many modern economists have criticized its validity. Critics argue that there can be situations where supply exceeds demand, leading to a deficiency in aggregate demand and unemployment. These situations can arise due to factors such as income inequality, savings behavior, or changes in expectations. Thus, Say's Law is not universally accepted and is often seen as an oversimplification of real-world economic dynamics.
| 5. How does Say's Law of Market influence the understanding of recessions and business cycles? | |
Ans. Say's Law of Market provides a different perspective on recessions and business cycles. According to the law, recessions or downturns in the economy are not caused by a lack of demand but by supply-side factors, such as a decrease in productivity or technological advancements disrupting certain industries. This implies that the focus should be on improving the supply-side of the economy rather than relying solely on stimulating demand to overcome recessions. This viewpoint has influenced the policy debates on how to address and manage economic downturns effectively.
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Nov 15, 2024 Last updated |
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