Page 240 - DECO402_Macro Economics

Unit-26: Kaldor’s Theory of Trade Cycle Contents

Conclusion Notes

Of many measure of stabilisation policy any single method is not sufficient for controlling cyclical ups
and downs. That is why all measures should be used together. Applying monetary policy is easy but
it is less effective, because in capitalist system using cyclical policy and direct control is difficult but
they are more effective. Because in capitalistic system, cyclical ups and downs are existent, hence it
is not possible to end them completely. Some ups and downs may be good for economic growth and
others not needed. Stabilisation policy should control unnecessary ups and downs.

Self Assessment

State whether the following statements are True or False:
7. Contraction phase of trade cycle is shown in three stages.
8. According to Kaldor, those forces which bring turn point towards bottom they are not
definite at the high level.
9. When there is an increase in capital stock of the economy it decreases the income of the
economy
10. Monetary policy is more effective in controlling boom or depression.

26.3 Summary

y For reducing personal expense, government increases rates of personal company and goods
taxes. When income is more than government expenditure then government adopts the policy
of surplus budget. It may be done by either increasing tax rates or by reducing government
expenditure or by both. It reduces income and total demand through opposite reaction of
multiplier.

26.4 Keywords

y Trade cycles—Business cycles.
y Single—Only.

26.5 Review Questions

1. What is Kaldor’s trade cycle theory? Explain.
2. Tell the stabilisation policies or measures to control trade cycles.

Answers: Self Assessment

1. cycle 2. effect 3. (a) 4. (a)
5. (b) 6. (a) 7. True 8. True
9. False 10. False

26.6 Further Readings

Books 1. Macroeconomics: Theory and Policy— H.L Ahuja, S.Chand and Publishers, 2010
2. Macroeconomics: S.K Chakravarty- Himalaya Publishing House, 2010.

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