CA Foundation · Business Economics · Business Cycles
Which economist's theory of business cycles holds that cycles are caused by sunspots affecting agricultural output, and hence the incomes of farmers and the demand for industrial goods?
Stanley Jevons proposed the sunspot theory of business cycles. He argued that sunspot activity changes rainfall and crop yields, which alters farmers' incomes and the demand for industrial goods, and thereby creates cyclical swings in the whole economy.
- AStanley JevonsCorrect
- BJ.M. Keynes
- CJoseph Schumpeter
- DPaul Samuelson
Explanation
Stanley Jevons proposed the sunspot theory. He argued that sunspot cycles alter rainfall and crop yields, which change farm incomes and the demand for industrial products, producing cycles. Schumpeter linked cycles to innovation, Keynes to aggregate demand and investment, and Samuelson to the multiplier-accelerator interaction.
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