KEYNESIAN ECONOMICS • What is Keynesian Economics? o A theory on how to prevent a recession and curb inflation based on the circular flow of money. o Keynesian economics warns against the practice of too much saving and not enough spending in the economy, and it also supports considerable redistribution of wealth by the government, when needed. • Who is John Maynard Keyes? o A British Economist o Wrote the book “The General Theory of Employment, Interest and Money” o Believed that the government should play an active role in supporting the demand for goods and services in order to preserve employment and prevent a recession. This could be done by lowering interest rates and taxation, as well as funding more public projects. o The need for substantial government spending during the Second World War supported Keynes’ ideas; therefore, after the war many countries implemented Keynes’ philosophies. • Flaws in the Theory
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This note was uploaded on 02/05/2011 for the course ECON 011 taught by Professor Yezer during the Fall '07 term at GWU.