keynesianismia

Keynesianism is a macroeconomic theory named after the British economist John Maynard Keynes. It posits that aggregate demand is the primary driver of economic output, especially in the short run. Keynesian economics emerged during the Great Depression as a response to the perceived failures of classical economics, which suggested that markets would naturally self-correct to full employment.

Keynesian theory emphasizes the role of government intervention in stabilizing the economy. During economic downturns, when private investment and consumption falter, Keynesians advocate for expansionary fiscal policy, such as increased government spending and tax cuts, to boost aggregate demand. Conversely, during periods of high inflation, contractionary fiscal policies, like reduced government spending and tax hikes, may be employed to curb demand.

A central concept in Keynesianism is the multiplier effect, which suggests that an initial change in spending can lead to a larger change in overall economic activity. The theory also highlights the importance of sticky wages and prices, meaning they do not adjust immediately to changes in supply and demand, which can prolong recessions. Keynesian economics has influenced economic policy in many countries, particularly regarding the use of fiscal stimulus during recessions. Debates continue regarding the effectiveness and potential drawbacks of government intervention in the economy.