"Keynesian economics ( KAYN-zee-ən; sometimes Keynesianism, named after British economist John Maynard Keynes)"
This topic covers the ideas of John Maynard Keynes and his followers. It discusses their contributions to economic thought and their ideas about economic growth, fiscal policy, and the role of government in the economy.
The Great Depression: The historical event that inspired Keynesian economics.
Macroeconomics: The study of large-scale economic behavior, which is the focus of Keynesian economics.
Aggregate demand: The total demand for all goods and services in an economy at a given time.
Aggregate supply: The total amount of goods and services produced in an economy.
Fiscal policy: The use of government spending and taxation to influence the economy.
Monetary policy: The use of monetary tools, such as interest rates, to influence the economy.
Multiplier effect: The idea that a change in spending can have a larger impact on the economy than the initial change in spending amount.
Crowding out: The idea that increased government spending can lead to a decrease in private sector spending.
Phillips Curve: The relationship between unemployment and inflation in the short run.
Sticky prices: The idea that prices do not adjust immediately to changes in supply and demand.
Animal spirits: The emotions and psychology of consumers and businesses that influence economic decision-making.
Say’s Law: The idea that supply creates its own demand, which Keynesian economics challenges.
Liquidity preference: The desire to hold onto cash or other liquid assets, which can influence interest rates and borrowing behavior.
Long-term economic growth: The relationship between short-term macroeconomic stabilization policies and long-term economic growth.
The role of government: The belief that government should play an active role in stabilizing the economy, rather than being hands-off.
The Keynesian Cross: A graphical representation of the relationship between income and spending in an economy.
Hicks-Hansen model: A more complex model of the Keynesian Cross.
The multiplier-accelerator model: A model that incorporates both Keynesian and classical economics to explain business cycles.
The role of international trade: The impact of international trade on Keynesian economic policies.
Post-Keynesian economics: A branch of Keynesian economics that focuses on the impact of power relations on economic behavior.
Traditional Keynesianism: Emphasizes the role of full employment as a macroeconomic goal and advocates for government intervention in the economy to achieve it. The theory focuses on stimulating aggregate demand through fiscal policy, increasing public expenditure, and decreasing taxes to boost economic growth.
Neo-Keynesianism: A more modern interpretation of Keynesian theory, it emphasizes the role of expectations and anticipations in shaping economic outcomes. It recognizes the role of supply side factors, such as market imperfections, and recommends structural policies that can be used to boost long-term productivity, including investments in education and infrastructure.
Post-Keynesianism: Developed after the 1960s, it emphasizes the importance of uncertainty and changing expectations in economic decision-making. It also recommends that the government play a more active role in stabilizing the economy through policies like a job guarantee program.
New Keynesianism: A more microeconomic-focused approach to Keynesian economics, it emphasizes the role of prices and wages in economic decision-making. It argues that prices and wages are inflexible and therefore may prevent market adjustments, and suggests that a combination of monetary and fiscal policy can help counteract these effects.
Kaleckian-Keynesianism: Based on the belief that capitalism is inherently unstable, this theory focuses on the power dynamics between workers and capitalists. It argues that increasing wages and social welfare programs can lead to better economic outcomes, and recommends the use of government programs to redistribute wealth and stabilize the economy.
Circuitism: An approach that emphasizes the importance of credit and banking in the economy, it argues that financial institutions and money creation have an important role in shaping economic outcomes. Circuitism also stresses the importance of government intervention and regulation of the banking system, and recommends policies that aim to increase the flow of credit to productive sectors of the economy.
"In the Keynesian view, aggregate demand does not necessarily equal the productive capacity of the economy. Instead, it is influenced by a host of factors – sometimes behaving erratically – affecting production, employment, and inflation."
"Keynesian economists generally argue that aggregate demand is volatile and unstable."
"Keynesian economists generally argue that aggregate demand is volatile and unstable and that, consequently, a market economy often experiences inefficient macroeconomic outcomes – a recession when demand is low, or inflation when demand is high."
"They argue that these economic fluctuations can be mitigated by economic policy responses coordinated between government and central bank."
"In particular, fiscal policy actions (taken by the government) and monetary policy actions (taken by the central bank) can help stabilize economic output, inflation, and unemployment over the business cycle."
"Keynesian economists generally advocate a regulated market economy – predominantly private sector but with an active role for government intervention during recessions and depressions."
"Keynesian economics developed during and after the Great Depression from the ideas presented by Keynes in his 1936 book, The General Theory of Employment, Interest and Money."
"Keynes' approach was a stark contrast to the aggregate supply-focused classical economics that preceded his book."
"Keynesian economics, as part of the neoclassical synthesis, served as the standard macroeconomic model in the developed nations during the later part of the Great Depression, World War II, and the post-war economic expansion (1945–1973)."
"It was developed in part to attempt to explain the Great Depression and to help economists understand future crises."
"It lost some influence following the oil shock and resulting stagflation of the 1970s."
"Keynesian economics was later redeveloped as New Keynesian economics, becoming part of the contemporary new neoclassical synthesis."
"The advent of the financial crisis of 2007–2008 sparked renewed interest in Keynesian policies by governments around the world."