Keynesian Economics And Economic Theory Essay

1940 Words Mar 22nd, 2015 8 Pages
Keynesian Economics is when the economic output is strongly influenced by aggregate demand, which is the total output spending in the economy. This theory is better known for understanding the Great Depression. Keynes argued that insufficient demand will lead to lengthy unemployment. According to this revolutionary idea there are four components that sum up the economy, that being said, the economy has consumption, investments, government purchases, and next exports. These four components are all that matters when it comes down to the economy, and these components can either make or break an economy in a matter of seconds. These components help the economy and they are the reason why we can spend what we can spend. Keynesian economics dominated economic theory until the 1970’s, while this evolved Keynes went through some scrutinizing criticism in order to make his wishes happen. The important part of Keynes plan for his theory was that the assertion of aggregate demand was created by homes, businesses, and the government. He wanted more money to be produced and he wanted more bills for people because if the people had more bills to pay, the more they would spend. They would continue to pay bills, and the banks would receive more money, causing the economy to be able to spend a little more. His theory also included that free markets could not lead to full employment and self-balancing. Because of his wishes the Keynesian people wanted to have a government…

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