Sunday, July 28, 2019

The ideas of John Keynes(1936) are extremely relevant to the current Essay

The ideas of John Keynes(1936) are extremely relevant to the current macroeconomic situation in the UK(situation of recent 5 years). Discuss - Essay Example Economics is the science of wealth creation and it involves formulation of theories that are debated and tested leading to some being accepted, rejected or modified. They all involve the question of what to produce using the scarce resources, how to ensure stable prices with full employment and how to ensure and provide a raising living standard for the people today and tomorrow.( Sloman 2010) John Keynes was (1883-1946) was a British economist whose ideas greatly impacted on the modern day macro economics with an effect on the British social liberalals. In 1936 he broke from the classical theory of economics with the publication of the General Theory of Employment, Interest and Money that advocated for an interventionist policies by the government. The main tool by which the government will intervene included the fiscal and monetary policy to mitigate against the adverse effects of capitalism that is recession, depression and business cycles. His theories are what are known as the Keynesian theory of economics. For the classical view held that in a recession that wages and salaries would decline to restore full employment, but Keynes held that the opposite was true. Falling prices and wages depresses peoples incomes thus preventing a revival of spending. Keynes insisted that a direct government spending was necessary to increase the spending. In his theory one persons sp ending goes towards another earnings thus when he/she is spending her money she/he is infect supporting another’s earning and the circle continues and this is what helps and support the normal function of an economy. When a depression hits, people hoard money and this action deprives the economy of money in circulation making it to be at a stand still. These ‘crunch’ can be best corrected by the government intervention so as

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