Unemployment caused by insufficient demand from "summary" of The General Theory of Employment, Interest, and Money by John Maynard Keynes
Involuntary unemployment is attributed to a deficiency of effective demand. It is the outcome of a situation where the total income is inadequate to purchase the total output produced. The primary cause of this deficiency lies in the lack of effective demand for goods and services. When demand falls short of the supply, there is a surplus of goods and services in the market. This surplus leads to a reduction in the production of goods and services. As a result, firms cut back on production and lay off workers, which further reduces the purchasing power of individuals in the economy. The level of employment in an economy is determined by the level of effective demand. If there is insufficient demand for goods and services, businesses will not produce as much, leading to a decrease in employment levels. This decrease in employment levels results in a decrease in income levels, further exacerbating the problem of insuffici...
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