The classic approach and the Keynesian theory
The classic approach provides us with an explanation of the poverty paradox in the midst of abundance; because the simple existence of an insufficient effective demand will often make the increase in occupation stop before the full occupation level has been reached.
In this way we can determine one of the main differences that classical theory gives us, which the richer the community, the greater the distance that separates its real production from the potential, this gives us to understand that its incentive to invest will be Weak despite its potential wealth, as for a poor community will be prone to consume most of its production. However, one of the teaching contributions that should not be forgotten is that the classic conclusions intend to be applicable to work in its entirety and this does not mean that an isolated individual can obtain employment accepting a reduction in his nominal salary that his classmates refuse.
Regarding the health emergency, we can say that when this pandemic arose many companies chose to raise the prices of the products that had the greatest demand, so we as consumers saw each other in the need to pay for that good because we really needed it, But if we see from another perspective there are many homes that have a high poverty rate, through which they did not have enough resources to stock up as people who were in better living conditions were.
In addition to its depth and scope, an outstanding characteristic of this crisis still for a region characterized by recurring macroeconomic shocks has been the speed of world impact through an immediate supply shock associated with the closure of economies and to containment and isolation measures social followed by an abrupt fall in aggregate demand. The impact of the crisis has resulted in an immediate collapse of the labor and relatives of a very broad set of the population. Pandemia and its effects on productive activities and work has caused numerous industries to be strongly affected, for example, the aerocomercial transport of people, tourism and hotel, among others.
Now, marginal consumption propensity measures how much a person’s consumption increases when their income available in a monetary unit is increased (Maynard, 1992).
We have seen and we can establish a difference that the greater the marginal propensity to consume, the greater the multiplier, this indicates in a paradoxical way that a poor community savings represents a very small part of the income through which based on that We can consider that it can be subject to violent fluctuations unlike a rich that therefore savings will be a greater proportion of income while the multiplier will be less.
In addition, it can be noted that although many people had a poverty index, but unfortunate this does not happen everywhere because many times the government said it stay at home, but it is very difficult to say stay when those who behind a screen suffered to get The food, today we see that through informal businesses people have come forward and that is very beneficial because in these times people fear going out so as not to get infected and it is there that the idea of selling something that has a better demand in the market can generate you higher economic income.
On the other hand, the Keynes system always recommends the application of monetary remedies to cure bad unemployment. It is for this reason that if we are tempted to ensure that money is the tonic that encourages the activity of the economic system, we must remember that a glass of water can fall to the floor at any time, so we have to analyze that a Increase in the amount of money reduces the interest rate, but this will not happen if liquidity preferences increase more than the amount of money.
The Keynes system implies that the higher the level of employment, the lower the performance of the work done and therefore its real salary will also be lower, the reduction of salary implies that the portion of the product received by employees must be reducing. Unemployment becomes a state of imbalance of the labor market and additionally the result of a voluntary action of the workers themselves. Currently, in Ecuador in times of health emergency, the unemployment rate increased rapidly because in this pandemic that no one was expected to make many companies close and therefore unemployment in times of sanitary emergency had a greater impact on the areas urban.
However, many employers were in need of terminating the contract using the reason for force majeure because it was not viable for them to continue with the employment relationship. Many companies had to reduce staff and in the same way there was a salary cut because employers no longer worked with a complete schedule. Unemployment increase is an effect in which everyone can be going through because in some way or another some companies have given the liquidation to these workers, but there is disagreement because the payment of profits has still been pending.
Conclusions
Pandemia came at a time when the world economy was slowing down. Unemployment today is very common, since it is one of the causes why many times we feel helpless under the situation. People with low economic resources or for the simple need to continue with their work activity take to the streets to work in an informal way and anyway because of this they have problems with the authorities because they allow us to work honestly and it is at that time When crime and violence manifests. On the other hand, insisting on the importance of the consumption of goods and services within the aggregate demand of a country might seem a redundant statement, in effect, the expense made by families is the main component of the aggregate demand of all countries and This through time.
Keynes advances give rise to various oppositions and even today the search for better explanations about consumption behavior and its components continue. Finally, this relative stability of employment is accompanied by a relative stability of prices, since the variations in employment are related to a certain rigidity of nominal wages. Indeed, experience shows that ‘labor does not require a higher salary when employment increases and before consenting a strong salary reduction, it prefers a certain degree of unemployment.
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