lj_economy.docx - The new Keynesian economy is the school of thought of modern macroeconomics evolved concerning classical Keynesian principles and was

lj_economy.docx - The new Keynesian economy is the school...

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The new Keynesian economy is the school of thought of modern macroeconomics, evolved concerning classical Keynesian principles, and was written during the periods of the Great Depression, around the 1930s, under the name of The General Theory of Employment, Interest, and Money. "Keynesian theory is a way of examining the effects on production and inflation of total spending in the economy." (Staff, March 2018) This new theory greatly influenced the academic and political world, especially in the 1960s. Subsequently, in the 1970s, new classical economists, however, questioned many precepts of the Keynesian revolution. Keynes said the government needed to increase spending and reduce taxes in order to increase demand and avoid recession for the global economy. The government should have promoted aggregate demand with policies of economic intervention and stabilization of activists, oriented towards the economy demand in the short term.

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