keynesianismissa

Keynesianism is a macroeconomic theory named after the British economist John Maynard Keynes. It posits that aggregate demand is the primary driver of economic activity. Keynesian economics suggests that during recessions, government intervention is necessary to stabilize the economy. This intervention typically involves fiscal policy, such as increasing government spending or cutting taxes, to boost demand. The theory emerged as a response to the Great Depression, challenging classical economic thought which believed markets would self-correct.

Keynesians argue that wages and prices can be sticky, meaning they do not adjust quickly enough to restore full employment. This stickiness can lead to prolonged periods of unemployment. Therefore, active policy measures are advocated to manage the business cycle. Monetary policy, such as adjusting interest rates, is also seen as a tool, though fiscal policy is often emphasized in Keynesian prescriptions for stimulating demand during downturns.

The core idea is that the economy can get stuck in a state of underemployment equilibrium. Governments should therefore actively manage aggregate demand to avoid such situations and promote full employment. Keynesian economics has influenced economic policy in many countries, particularly in the mid-20th century, and continues to be a significant school of thought in macroeconomics. Debates persist regarding the effectiveness and appropriate scale of government intervention.