Overproduction

From Academic Kids

In economics, overproduction refers to more than excess supply in a few markets but to a "general glut (http://cepa.newschool.edu/het/essays/classic/glut.htm)" of products being sold on the market for an economic system as a whole. Too many products are being sold relative to effective demand or aggregate demand, so that there is an unplanned accumulation of inventories. It corresponds to unemployed labor and unemployed fixed capital.

The existence of general overproduction indicates the falsity of Say's Law. It is central to the Marxian theory of crisis and to Keynesian economics. Overproduction differs from underconsumption, in which the excess supply results only from low consumer demand. Overproduction can also arise due to low fixed investment, low net exports, or contractionary fiscal or monetary policy.

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