22-th topic. Keynesianism

Economic output in the short run, especially during recessions, is strongly influenced by aggregate demand. Total spending in the economy leads to increase in aggregate demand and this is regulation of economy by government, that very important for every economic system. These are main concepts of Keynesian economics or Keynesianism.

The theories forming the basis of Keynesian economics were first presented by the British economist John Maynard Keynes in his book, “The General Theory of Employment, Interest and Money”, published in 1936 - during the Great Depression.

In the Keynesian view:

§  aggregate demand does not necessarily equal the productive capacity of the economy;

§  it is influenced by a host of factors and sometimes behaves erratically, affecting production, employment and inflation.

Keynes argues that private sector decisions sometimes lead to inefficient macroeconomic outcomes. This require active policy responses by the government (public sector), particularly, fiscal policy actions by the government and monetary policy actions by the central bank, in order to stabilize output over the business cycle.

Keynesian economics advocates a mixed economy – predominantly private sector, but with a role for government intervention. This concept is very important especially during recessions – and in the developed nations served as the standard economic model during:

§  the later part of the Great Depression;

§  World War II;

§  post-war economic expansion (1945–1973).

The last global financial crisis in 2008 has evidenced the Keynesian thought.

Some materials is from Wikipedia

Aghanemat Aghayev