Keynesian Economics is a central doctrine in economics that forms the foundation of modern macroeconomic thinking. It was established by John Maynard Keynes during the 1930s. In 1936, the British economist published his book “The General Theory of Employment, Interest and Money” that forms the basis of the Keynesian school. The following series of blog posts will introduce Keynesian Economics, provide useful insights and discuss the most important concepts. The first post is dedicated to aggregate demand, the key concept of Keynesian Economics. The following post explains the dynamics of Keynesian Economics in an aggregate supply/ aggregate demand (AS-AD) model. The third post discusses the remedies of Keynesian Economics in the light of a recession. Finally, the last post elaborates some drawbacks of Keynesianism.
In this article, we will discuss the concept of aggregate demand, the central idea of Keynesian economics. Understanding aggregate demand is key in understanding Keynesian Economics. Particularly, understanding aggregate demand helps to grasp why Keynesians tend to favor activist monetary and fiscal policy during recessionary times.
Keynesian Economics in an AS-AD model
This piece explains the dynamics of Keynesian Economics within an AS-AD (aggregate supply/ aggregate demand) model. Particularly, the article presents what happens to output and inflation if aggregate demand decreases.
How to get out of a recession?
This post shortly elucidates on the measures that, according to Keynesian Economics, are necessary to counteract a recession.
Drawbacks of Keynesian Economics
The last post of the series on Keynesian Economics discusses various drawback and problems of the theory.
Overall, Keynesian Economics is very important to understand and explain business cycle fluctuations. It is central to the modern understanding of macroeconomics. That said there are also various limitations to the Keynesian ways of understanding the world.
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