Principles of the keynesian econmics.docx - Principles of...

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Principles of the New Keynesian Economics New Keynesian (or Neo-Keynesian) builds upon the classical Keynesian theory of macroeconomics. To start with, John Maynard Keynes developed Keynesian or Classical Keynesian during the times of the Great Depression (around 1930s). As per Investopedia, Staff, I. (2018, March 28), Keynesian theory is a way of looking at the effects on output and inflation from the total spending in the economy. Keynes had promoted the government to increase spending, plus lowering taxes, in order to encourage demand, which will eventually pull the global economy out of recession. He believed that the government through economic intervention policies and activist stabilization could promote the aggregate demand. This focuses very much on the demand side of the economy over the short run period. Neo-Keynesian theory, although building upon the classical theory, had some significant differences from the former. Neo-Keynesian economists argued that the classical theory was

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