econ-journal28 - States economy out of the depression As...

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Duc Hoang –ECON210 Journal date 11-2 Keynesian Economics         Up until the Great Depression, the United States used the “classical” or  conservative” version of capitalism. This version stated that the economy was self- correcting and was best left untouched. The depression brought a huge decline in the  economy and many individuals to search and unveil a new version of capitalism. In 1936,  John Maynard Keynes published a book explaining his views on the economy and how  the economy could be restored.  Unlike the classical version of economics, Keynes believed that the aggregate  demand was unstable. He thought that an increase in the aggregate demand, and an  expansionary fiscal policy to deal with problems which may arise, would bring the United 
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Unformatted text preview: States economy out of the depression. As the aggregate demand increases the price level falls, influencing people to buy more at lower prices and an increase in the amount of goods and services demanded. This would ultimately result in a government budget deficit where the total government expenditures exceed the total government revenues. By shifting the aggregate demand, the equilibrium level of aggregate output and employment would rise. Keynesian economics flourished and ultimately brought the nation out of the Great Depression. It encouraged full employment and price stability. Unfortunately, prices are not stable for long periods of time and as inflation increases the Keynesian model applies less and less....
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This note was uploaded on 03/10/2011 for the course ECON 101 taught by Professor Duc during the Spring '05 term at Linfield.

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econ-journal28 - States economy out of the depression As...

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