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Keynesian economics

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Keynesian economics

  1. 1. Keynesian Economics - JOHN MAYNARD KEYNES (1883- 1946) Definition:- Keynesian Economics is an economic theory named after John Maynard Keynes (1883- 1946), a British Economist. It was his simple explanation for the cause of the Great Depression for which he is most well-known. Keynes‘ economic theory was based on an circular flow of money.
  2. 2. Keynesian Economics  In Keynes' theory, one person's spending goes towards another's earnings, and when that person spends her earnings she is, in effect, supporting another's earnings.  The key to Keynes’s contribution was his realization that liquidity preference — the desire of individuals to hold liquid monetary assets.  Keynes' solution to this poor economic state was to prime the pump. By prime the pump, Keynes argued that the government should step in to increase spending, either by increasing the money supply or by actually buying things on the market itself.  Keynesian economics advocates for the public sector to step in to assist the economy generally, it is a significant departure from popular economic thought which preceded it — laissez-fair capitalism. Laissez-fair capitalism
  3. 3. Cont..  Keynesian economics warns against the practice of too much saving, or under consumption, and not enough consumption, or spending, in the economy. It also supports considerable redistribution of wealth, when needed. Keynesian economics further concludes that there is a pragmatic reason for the massive redistribution of wealth: if the poorer segments of society are given sums of money, they will likely spend it, rather than save it, thus promoting economic growth.  They assert that unemployment can be readily cured through governmental deficit spending, and that inflation can be checked by means of government tax surpluses.

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