The three basic psychological laws of insufficient effective demand

The three basic psychological laws are the law of diminishing propensity to consume, and the marginal efficiency of capital (expected rate of profit.

The law of decline and the law of flow preference. Three laws explain Keynes.

The effective demand in the effective demand theory is insufficient. Among them, the law of diminishing propensity to consume explains the lack of consumer demand; The law of diminishing marginal efficiency of capital and the law of flow preference explain the lack of investment demand. The basic content of the law of diminishing propensity to consume is:

Consumption expenditure depends on the size of income, because people naturally love to save, so when income increases, they tend to save more money, so that when income increases, although the absolute amount of consumption increases, the increase in consumption is not as fast as income. [1]

Marginal efficiency of capital.

The basic content of the law of diminishing marginal efficiency of capital (or expected rate of return) is: investment is an important determinant of employment, and investment decisions emphasize entrepreneurs' expectations of future market prospects, and entrepreneurs' expectations of future capital gains are based on irrational expectations, and the decisions made for the uncertain future are extremely unreliable and prone to sudden and drastic changes, so the marginal efficiency of capital fluctuates in the short term. In addition, an increase in investment will increase the supply of capital assets**, so the marginal efficiency of capital has a downward trend in the long run.

Regularity of flow preference.

The basic content of the law of liquidity preference is: Liquidity refers to the degree of ease with which an asset can be turned into cash without damaging its original value. Of all the asset forms, cash itself is the most liquid, so people have a special psychological preference for cash and like to keep some of their assets in the form of cash.

In order for him to give up this preference and lend cash to others, he must pay interest to compensate for the loss of his abandonment of the liquidity preference, so the interest is the reward for the abandonment of the liquidity preference. People prefer to preserve their wealth in the form of cash because of three motivations: transactional motivation, i.e., the need for cash for personal or business transactions; The prudential motive, i.e., the protection of the future cash value of a portion of an asset.

or to meet unforeseen needs; Speculative motives, i.e. the use of cash for profit.

For underconsumption and underinvestment, Keynes.

It is explained by three basic laws, namely, the law of diminishing marginal propensity to consume, the law of diminishing marginal efficiency of capital, and the preference for liquidity.

1) The law of diminishing marginal propensity to consume refers to the fact that although people's consumption increases with the increase of income, the part of the increased income used to increase consumption is less and less, Keynes believed that the law of diminishing marginal propensity to consume is determined by human nature. As a result of this law, there is underconsumption.

2) The law of diminishing marginal efficiency of capital. The marginal efficiency of capital is the discount rate at which the sum of the present values of expected returns is equal to the capital goods**.

It reflects the expected profit margin of the manufacturer to increase investment.

Diminishing marginal efficiency of capital means that the expected rate of return decreases when manufacturers increase investment. Keynes believed that investment demand depends on the marginal efficiency of capital in relation to interest rates. Corresponds to an established interest rate.

Investment will only occur if the marginal efficiency of capital is higher than this rate of interest. However, in Keynes's view, because the marginal efficiency of capital is diminishing in the long run, unless the rate of interest can be low enough, it will lead to insufficient demand for investment in the economic society.

There are two main reasons for the diminishing marginal efficiency of capital: 1) the continuous increase of investment will inevitably lead to an increase in the supply of capital goods**, and the increase in the supply of capital goods** means an increase in costs, which will lead to a decrease in the expected rate of return of investment; 2) Increasing investment. It will increase the number of products produced, and the increase in the number of products will reduce its market**, and thus the expected profit margin of the investment will also decrease.

The diminishing marginal efficiency of capital makes capitalists often lack confidence in the future, which leads to a lack of investment demand.

3) Flow preference. Keynes believed that the reason why people have a preference for money is because money is the most liquid or flexible asset, and money can be used for trading at any time, can be used for contingencies at any time, and can be used for speculation at any time, so people have a preference for holding money. When the rate of interest is reduced to a certain extent, it is expected that the price ** has reached its maximum, and thus holds the currency, so that the demand for the currency tends to infinity.

As a result, no matter how large the money supply is, the money market.

will not go down again.

Because of this psychological law, the interest rate remains high. When the expected profit margin is lower than or close to the interest rate, manufacturers are reluctant to invest, which also leads to insufficient investment demand.

The main reasons for the lack of effective demand are:

1) The law of diminishing propensity to consume works.

2) Diminishing marginal efficiency of capital (investment).

3) The psychology of "liquidity preference", i.e., always preferring to save a portion of one's income in the form of flexible cash.

The supply of labor depends mainly on wages. The substitution effect and income effect caused by the increase in wages determine the supply of labor. The substitution effect is that as wages rise, each hour of leisure becomes more expensive, so that workers will reduce their need for leisure and increase their demand for income, resulting in more work instead of leisure.

The income effect is that higher wages will make workers richer, and rents will increase their demand for leisure, so higher wages will lead to a decrease in the supply of labor. If the income effect is greater than the substitution effect, the increase in wages will reduce the labor supply and reduce the labor supply, causing the labor supply curve to bend backwards.

Summary. Hello, for your question [Solution to Insufficient Effective Demand] This question is answered as follows: The solution to insufficient effective demand is as follows:

The first is to speed up the construction of affordable housing projects. The second is to speed up the construction of rural infrastructure. Intensify the construction of rural biogas, drinking water safety projects and rural roads, improve rural power grids, and speed up the construction of major infrastructure such as railways, highways, and airports.

Fourth, we should speed up the development of medical and public health, culture, and education. Fifth, strengthen the construction of the ecological environment. Sixth, we should speed up independent innovation and structural adjustment.

Support the construction of high-tech industrialization and industrial technological progress, and support the development of the service industry. Seventh, increase the income of urban and rural residents. The biggest problem in our country is the gap between the rich and the poor.

The level of low income in rural areas is the main cause of the gap between urban and rural areas, and it is the embodiment of the gap between the rich and the poor. Such a policy of benefiting farmers is a direct solution to the rural problem. Eighth, the VAT transformation and reform will be fully implemented in all regions and industries across the country, and enterprises will be encouraged to transform themselves technologically and reduce their burdens.

Hello, for your question [solutions to insufficient effective demand] This question is answered as follows: The solutions to insufficient effective demand are as follows: First, accelerate the construction of affordable housing projects.

The second is to speed up the construction of rural infrastructure. We will intensify the construction of rural biogas and drinking water safety projects and rural roads, improve rural power grids, and speed up the construction of major infrastructure such as railways, highways, and airports. Fourth, we should speed up the development of medical and public health, culture, and education.

Fifth, strengthen the construction of the ecological environment. Sixth, we should speed up independent innovation and structural adjustment. Support the construction of high-tech industrialization and industrial technological progress, and support the development of the service industry.

Seventh, increase the income of urban and rural residents. The biggest problem in our country is the gap between the rich and the poor. The level of low-income groups in rural areas is the main cause of the gap between urban and rural areas, and it is the embodiment of the gap between the rich and the poor.

This state-like policy of benefiting farmers is a direct solution to the rural problem. Eighth, the VAT transformation and reform will be fully implemented in all regions and industries across the country, and enterprises will be encouraged to transform themselves technologically and reduce their burdens.

The root cause of the lack of effective demand is the problem of monetary aggregates, that is, the insufficient supply of money, not the problem of monetary structure. We cannot only be familiar with the fact that the excess of effective demand is due to the excess of money, but we are not familiar with the fact that the cause of the lack of effective demand is the shortage of money. The lack of demand must be reversed by a corresponding increase in currency.

This is because, under the pressure of insufficient demand, sluggish circulation, and economic contraction, it is not only difficult to quickly and effectively rationally adjust the economic structure, but is more likely to be distorted, for example, the gap between urban and rural areas and the gap between the rich and the poor in China is getting bigger and bigger, not getting smaller and smaller. Therefore, to solve the structural problem, we must first solve the problem of insufficient demand. A quick and effective solution to the problem of insufficient demand is to increase the monetary aggregate accordingly.

Until the situation of monetary shortages is fundamentally reversed, the state is making structural efforts to address demand and unemployment in certain specific areas.

Still have questions? Kiss, can you talk about it specifically? Or is there anything you'd like to talk about? <>

In order to deal with the shortage of effective demand, it is necessary not only to readjust the industrial structure, do a good job in the overall social structure, and create intermediate demand through the upgrading of the industrial structure, but also to make corresponding improvements in economic policies, so as to increase the degree of transformation of demand, so as to cure both the symptoms and the root causes.

1. Structural thinking.

In the long run, to activate effective demand, we should not only start by adjusting the product mix, promote the convergence of production and marketing, and support the development of housing, transportation, and information industries, which may become hot spots in the next round of consumption, but also promote the transformation and upgrading of the industrial structure, and actively develop and create intermediate demand.

2. Policy measures.

As a short-term measure, various economic policies should be coordinated to promote the improvement of the degree of demand transformation.

1) In terms of fiscal policy, the general idea is to promote the transformation of income into consumption and give full play to the "automatic stabilizer" function of fiscal policy.

2) In terms of monetary policy, although the neutral currency policy is a medium- and long-term operating idea, in order to curb the inhibitory effect of deflationary expectations on effective demand, it is necessary to make a temporary moderate loosening in the short term to restore prices to normal levels.

3) In terms of credit policy, it is necessary to increase the intensity of credit delivery, decentralize the right to issue credit, and give priority to credit support for loan projects with market and efficiency. Credit support should also be given to investment projects with their own funds in place and feasible.

4) In terms of distribution policies, on the one hand, the excessive growth of high-income residents' income should be limited by imposing inheritance tax, raising tax rates, and intensifying tax collection and management. On the other hand, through poverty alleviation and relief expenditures, the level of subsidies should be appropriately raised, the income of low-income residents should be increased, and the overall level of social consumption should be raised.

5) In terms of investment policy, first, it is conducive to improving the degree of transformation of demand and expanding immediate effective demand; Second, we should not increase or increase supply as little as possible in the short term; Third, it is conducive to enhancing the stamina of economic development. Judging from this, the current investment should focus on infrastructure, research and development investment, education investment, and equipment renewal and transformation.

6) In terms of consumption policy, all kinds of restrictive measures imposed on certain consumer goods, such as electricity and automobiles, should be immediately lifted.

7) In terms of foreign economic and trade policies, the adverse impact of the Asian financial crisis on China's exports and foreign direct investment will be mitigated by raising the tax rebate rate, speeding up the progress of export tax rebates, relaxing the industrial restrictions on foreign direct investment, and giving preferential and duty-free treatment to foreign investment in imported equipment.

8) Vigorously develop the rural consumer goods market.

It is necessary to use limited resources to the best of their ability.

Expansion of reproduction and development of pre-sale plans.

At work, it is inevitable to encounter outrageous needs.

1.A customer wanted a feature that was completely impossible, but they insisted that it was a must-have. This need may be because the customer doesn't understand the limitations of the technical capabilities, or their expectations are too high, but when you tell them they can't do it, they get frustrated and dissatisfied.

2.Your superiors ask you to complete a very complex task in a very short time, which can be said to be an impossible task. They may not be aware of the time and resource constraints, or they may simply want you to be able to complete the task, regardless of the time and resource constraints.

3.Clients or leaders ask you to provide statistics or analysis that are not realistic. This could be because your client or leader doesn't understand the basics of statistics or data analysis, or they just want to see results that meet their expectations.

4.You are required to complete a large project in a very short period of time, but do not provide sufficient resources or support. This need is completely beyond your capabilities, but you can't give up because your leader or client has already committed to the time for the project to be delivered.

5.Sometimes, customers or leaders will make very strange requests, such as asking you to design a very ugly interface, or asking you to add features that are completely unnecessary. This may be because they don't consider the importance of user experience or interface design, or because they just want to add some ideas of their own to the project.

No matter what kind of needs are encountered, as a staff member, while ensuring the best service quality, Tan Yu must try his best to meet the needs of customers or leaders. However, if these requirements are contrary to practical possibilities or ethical requirements, we need to firmly explain the situation to superiors or customers and provide appropriate solutions.