The Keynesian School Of Economic Thought

The expression "Keynesian economics" was utilized to allude to the idea that ideal monetary execution could be accomplished and financial droops avoided by affecting total request through dissident adjustment and financial mediation approaches by the administration. Keynesian financial matters is thought to be a "demand side" hypothesis that spotlights on changes in the economy over the short run. Basically Keynesian economics are the different theories about how in the short run, and particularly during the recessions, monetary output is strongly impacted by total request (total spending in the economy).

John Maynard Keynes a British economist was the founder of Keynesian economic theory. Keynesian economics is a form of demand side economics that inspires government action to increase or decrease demand and output. Classical economists had looked at the equilibrium of supply and demand for individuals, but Keynesians focuses on the economy as a whole. Keynesian

Keynesianism and monetarism are both ways to stabilize the economy and promote growth when need. In keynesianism, government uses fiscal policy which is a list of policies that government spending and taxing can be used to improve the performance of an economy. The government produces stabilization by taxing and

John Maynard Keynes was an economist instrumental in the theories that aided in the construction of the New Deal during the great depression. He believed that it was appropriate for government to use tax and spend policies in order to stimulate the government. He felt that by using this fiscal policy it would keep the country out of a recession or depression. Beings it is an election year, and the economy affects everyone in the country, I wanted to look into the Keynes theories and discover if it is necessarily a good economic choice.

In order to discuss the statement in the title, I will first talk about J. M. Keynes and give some general information regarding his life and career. Following I will discuss about Keynes criticism of Say’s Law starting with Aggregate Demand and how consumption together with investment are in relation to income. Afterwards I will highlight the role of investment and what the policy implications are. For the final part of this essay I will conclude with some evidence to support the claims made.

Multi-billion dollar corporations pay increasingly less to their workers so that capital will remain high. In today’s society workers cannot depend on making more than they expect because the Canadian capitalist system exploits workers. Many theorists can argue how the middle class cannot reach their dream, almost impossible such as John Kenneth Galbraith, Milton Friedman and John Maynard Keynes. Firstly, Galbraith influenced economic thought in a way that international corporations held the real decision making control in the economy, arguing that middle class individuals should also be considered into the economy to reach their goal of affluence. Additionally, he believed that more government involvement and regulation policies for the economy should be imposed, to help improve society and diminish poverty. For instance, a high production rate in consumer goods including automobiles and televisions in abundance to public goods including schools, hospitals and parks being short in supply. In contrast to Galbraith, Milton Friedman argued against government intervention in the free-market economy, believing that the government intervention resulted in price inflation and increased public debt. Friedman argued the most important way into maintaining a healthy economy for all classes is to regulate the supply of money in circulation known as monetarism. Furthermore, John Maynard Keynes, a historical economist during the Great Depression, recognized the importance of government spending to combat economic downturns including the Great Depression. Keynes explained the importance of investment in maintaining high employment levels and higher rewarding opportunities for middle class

During the Great depression, British economist John Maynard Keynes developed what is known as the Keynesian economics. Keynesian economics is an economic theory of aggregate demand or the total spending in the economy. (Investopedia, LLC., 2003)

Two of the largest economic theories are Keynesian economics and supply-side (classic) economics. They have their similarities, but they also have their own unique qualities. Keynesian economics (Keynesianism) are the multiple theories about how during the short runs, mainly in recessions, economic output is influenced a lot by cumulative demand. Supply-side economics is an economic theory that says, by lowering the taxes on corporations, the government can stimulate investment in the industry and therefore raise production, which will lower prices and control inflation. (Differences Between)

We can see the implementation of Keynes’s and Hayek’s theory throughout history and even in today economy. Keynesian economics was created by the British economist John Maynard Keynes in the 1930’s. The theory is the idea of increasing the government spending and lower taxes in times of depression. In times of economic prosper the government supported to cut spending and raise taxis to save up for the next depression. An example of a country using Keynesian economics to stop an economic depression is during the Great Desperation. Franklin D. Roosevelt the president during that time used Keynesian to push the U.S. out of the Great Desperation. In the movie, they talk about the steps taken to help the U.S. “They were at war with the Great Depression, and they responded with frenetic activity, relief programs for the unemployed, for the hungry; programs to get people back to work.” (Commanding Heights, Daniel Yergin).

The idea behind Keynesian demand economics is that the "government can stipulate demand and create a cycle of increased production and jobs that will pull the economy out of the recession" all through the decisions regarding taxing and spending to create deficients. This is best during periods of recession when the problem is so big it needs the governments help to fix it.

In an attempt to influence their economy, a government will take certain types of actions. The types of actions that a government will take to influence its economy are inclusive of “setting interest rates through a federal reserve, regulating the level of government expenditures, creating private property rights, and setting tax rates.” () A government will implement policies to help control, or in some case, help remedy an economic crisis. This essay will be inclusive of three governmental policies, implemented after 1970, to remedy and economic crisis, as well as evaluate the policies effectiveness. This essay will alp provide a brief explanation of how the Keynesian model of economics was applied to the economic crises of the 1970’s. Lastly, there will be an overview of how governments can create demand to correct market failure.

To begin with, Keynes came up with a theory that challenged monetarist model, that was widely employed in 1930s, as a reflection of the unprecedented events of the Great Depression. From Keynes’ point of view, it was the failure of the free market theory that led the world into financial crisis. Keynes stressed the fact that non-interventionist policies proposed by monetarist economists were the main cause of the depression. He believed that during the liquidity trap governments’ best response is to stimulate the aggregate demand in the economy to offset lack of confidence among consumers and investors (Field 2011). Fear of future unemployment, uncertainty about the impacts of recession, incentives consumers delay

The U.S. never fully recovered from the Great Depression until the government employed the use of Keynes Economics. John Maynard Keynes was a British economist whose ideas and theories have greatly influenced the practice of modern economics as well as the economic policies of governments worldwide. He believed that in times when the economy slowed down or encountered declines, people would not spend as much money and therefore the economy would steadily decline until a depression occurred. He proposed that if the government injected money into the economy, it would help stimulate consumers to purchase more and firms would produce more as a result, in a continuous cycle. This cycle is called the multiplier effect. Keynes ideas have

growth and low growth of aggregate demand. Keynes urged that the economy can be below full

| Advocates of active monetary and fiscal policy view the economy as inherently unstable and believe that policy can manage aggregate demand, and thereby, production and employment, to offset the inherent instability. When aggregate demand is inadequate to ensure full employment, policymakers should boost government spending, cut taxes, and expand money supply. However, when aggregate demand is excessive, risking higher inflation, policymakers should cut government spending, raise taxes, and reduce the money supply. Such policy actions put