Describe Keyne's theory of aggregate demand as it relates to wage levels and employment. Did Keynes believe that unemployment is caused by sticky wage.
Describe Keyne's theory of aggregate
J. M. Keynes wrote the famous book 'General Theory,' in which he criticized an explanation for the Great Depression of the 1930s and proposed solutions. In addition, he provided his own income and employment hypothesis. In Keynes opinion Aggregate demand and supply in the country determine the amount of national income and hence employment in the short run. When aggregate demand equals aggregate supply, national income reaches equilibrium. This point is also known as the effective demand point. Keynes employment theory is a demand-oriented theory. This means Keynes viewed employment and unemployment from the demand side of the equation. The volume of employment in a country, according to Keynes, is determined by the degree of effective demand for goods and services. The lack of effective demand is attributed for unemployment.
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