Keynesianism Economics

Wow!  I never knew there was an actual person who answered the problems of the Great Depression.

1. DEFINITION of ‘Keynesian Economics’ An economic theory of total spending in the economy and its effects on output and inflation.  Keynesian economics was developed by the British economist John Maynard Keynes during the 1930s in an attempt to understand the Great Depression.

From Wikipedia:

Keynesian economics (/ˈkeɪnziən/ kayn-zee-ən; or Keynesianism) is the view that in the short run, especially during recessions, economic output is strongly influenced byaggregate demand (total spending in 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 and sometimes behaves erratically, affecting production, employment, and inflation.^[1]

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. Keynes contrasted his approach to the aggregate supply-focused ‘classical‘ economics that preceded his book. The interpretations of Keynes that followed are contentious and several schools of economic thought claim his legacy.

Keynesian economists often argue that private sector decisions sometimes lead to inefficient macroeconomic outcomes which require active policy responses by the public sector, in particular, monetary policy actions by the central bank and fiscal policy actions by the government, in order to stabilize output over the business cycle.^[2] Keynesian economics advocates a mixed economy – predominantly private sector, but with a role for government intervention during recessions.

Keynesian economics served as the standard economic model in the developed nationsduring the later part of the Great Depression, World War II, and the post-war economic expansion (1945–1973), though it lost some influence following the oil shock and resulting stagflation of the 1970s.^[3] The advent of the global financial crisis in 2008 has caused a resurgence in Keynesian thought.^[4]