Question

Describe the key ideas introduced by J.M. Keyes in The General Theory which effectively gave birth to a new way to think about economics, Macroeconomics.

Answer 1

The key ideas introduced by JM KEYES in general theory are -

• He talkes about the three main topics which is most important factor in thinking econcomics in a new way i.e Employment, interest and money.
• He argumented on the topic regaring that market are imperfect in nature and it cannot always be self correct . It needs necessary steps to make market perfect.
• He believed that if one starts savings in excessive mode its will lead to recession as saving will lead to low consumer spending. Hence Keyes believed that excessive saving and wage reduction at the time recession will have a direct threat to the economy.
• He belived that since markets are imperfect it need government interfernece and intervention through policies mainly fiscal and monetary policy. Fiscal policy through government intervention can be done as investment in infrastructure and mometary policy through government intervention can done as applicable interest rates.
• He focused on unemployment and low wage rates .Keyes believed that if people have low wage rate it will be threat to the economy as they will spend less .
• Negative effects on business cycle should be removed by government.This can be done while spending less at the time of recession and excessive spending at thr time of inflation

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