Keynesian+Economics

=**Keynesian Economics** =

====__**Keynesian Economics** __- the theory that the government must stimulate demand, in order for full employment and growth to be possible ====

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 * ====John Keynes, a famous English economist, created the theory of Keynesian Economics. ====
 * ====He argued that government intervention in the economy could moderate the eb and flow of the economy. Ups and downs are an unavoidable characteristic of a Capitilist economy. ====
 * ====Six Principles of a Keynesian Economy are: ====
 * 1) ====Aggregate demand is influenced by a host of economic decisions (public and private) and sometimes behaves erratically. ====
 * 2) ====Changes in aggregate demand have their greatest short-run effect on real output and employment, but not prices. ====
 * 3) ====Prices and wages respond slowly to changes in suply and demand which results in periodic shortages and surpluses ( especially in labor). ====
 * 4) ====Keynesians do not think that the typical level of unemplyment is ideal because unemployment is subject to the sudden change of aggregate demand. ====
 * 5) ====Keynesians advocate activist stabilization policy to reduce the amplitude of the business cycle which is most important of all economic problems. ====
 * 6) ====Keynesians are more concerned about combating unemployment than conquering inflation. ====
 * ====Roosevelt's massive spending put this theory to test. ====
 * ====His uninhibited willingness to use the federal government to stimulate aggregate demand and there by raise output and employment which can be seen as a historical confirmation of the Keynesian policy. ====
 * ====Few understood Keynesian Economics during the time of the New Deal, but these policies would have a tremendous impact of U.S. politics. ====