Cycles And Growth: A Note On Development In A Market Economy

The paper moves in a theoretical context in which the level of economic activity is dependent on aggregate demand in the long as well as in the short period. The paper shows that given two simple hypotheses the economy will exhibit a tendency to grow independently of the average level of investment (or other ‘autonomous’ demand) over time. The two hypotheses are a) that investment oscillates over time and b) that the community’s marginal propensity to consume is lower when income contracts in the slumps than when income increases. The two assumptions thus point to a possible source of growth which is endogenous to the system.