Born June 5, 1883, in
His father was a professor
at Cambridge, and his
mother one of the first
women to attend
He attended College at
Eton, and then went on to
study at Cambridge
necessary to a thriving
If the economy goes through a recession, the
Increase the level of government expenditure on
More people are employed
Government must buy products from private
manufactures, which further stimulates the economy
If people are making more money, they will want to buy
more things, which would help the economy.
Decrease interest rates
If it is more economically beneficial for consumers to
spend, rather than save, the economy will be further
boosted because the more money that goes through the
economy, the better off the economy is.
If there is an economic boom, the government
Increase interest rates to encourage saving,
and discourage spending
Decrease the level of government expenditure
Increase taxes to both discourage spending,
and enable the government to pay back debts
accumulated during economic crises.
Contrary to the economic theories of his day,
Keynes believed that the key to a healthy
economy was by spending, not saving.
Increase in Demand Increase in manufacturing
Increased Manufacturing firms employ
incomes more people
This process continues until the “leakages”
(taxes, savings, and imports) eventually bring the
economy back to equilibrium.
Influences to our
Very popular during and after World
Inspires ours current economic
During World War I, federal spending increases
In the 1920s, the government cuts back on
spending in order to repay debts accumulated
during the war.
The economy goes into a major recession.
Organized Labor declines. For example, employment of
The United Mine Workers Union, falls from 500,000
workers in 1920 to 75,000 in 1928.
As many as 200,000 workers/year are replaced by
Money remains stationary in the upper classes.
1,489 people report half-million dollar incomes in 1929, compared
with 156 in 1920.
Sweden becomes the first nation to fully recover
from The Depression, having applied Keynes’s
policy of deficit spending
Germany becomes the second, followed by Great
Britain two years later; both countries having
increased deficit spending in preparation for war
President Roosevelt; however, rejected this
Keynesian economic policy, and didn’t recover from
the Depression until we, too, began preparing for
Impact on our Current Society
Overall, Keynesian Economics does not greatly
influence our current economic system.
However, because of our economic crisis, a
number of these theories are being pulled out to
help create reform plans; such as, out bailout
and stimulus packages.
The military also uses Keynesian theory to
support continued spending for national defense,
claiming that otherwise we would fall into an
o Gill, Richard T. "Keynes, John Maynard." Grolier Multimedia
Encyclopedia. 2009. Grolier Online. 6 Oct. 2009
o Higgs, Robert. “World War II and the Triumph of Keynesianism” The
Future of Freedom Foundation. (March 1995) <www.fff.org/freedom>
o Kanga, Steve. “Timelines of the Great Depression.” The Great
Depression. Las Vegas, NV