<?xml version="1.0" encoding="UTF-8"?><rss xmlns:dc="http://purl.org/dc/elements/1.1/" xmlns:content="http://purl.org/rss/1.0/modules/content/" xmlns:atom="http://www.w3.org/2005/Atom" version="2.0"><channel><title><![CDATA[Keynesianism]]></title><description><![CDATA[<p dir="auto">noun; a school of economic thought prevalent after World War 2; around 1980, Keynesianism was supposedly superseded by monetarism, and then by the rational expectations hypothesis. Theory is named for John M. Keynes (1881-1946), who argued against the then-mainstream view that the economy was self correcting.  Keynes book introducing his economic theory was The General Theory of Employment, Interest, and Money (1936).<br />
Basic Concept</p>
<p dir="auto">The basic concept of Keynesianism is that each economy has a level of [aggregate demand], which does not respond to price or income levels in the same way that [classical economics] says it should.  Rising income, for example, does not lead to a matching increase in consumption or business investment.  Business investment is driven by investment opportunity, not {only by interest rates.  Savings is driven by [liquidity preference], not only by interest rates.<br />
Keynes suggested that, for any economy, there was a [marginal propensity to consume] that was less than one.  Hence, if the national income rose by 10%, consumption would rise by something less than 10%.  This would lead to some production not being consumed, waste, and unemployment.<br />
What Keynesianism Says We Should Do</p>
<p dir="auto">In 1936, when Keynes wrote The General Theory, most of the world was suffering from the Great Depression.  Keynes recommended that the national government stimulation aggregate demand through a policy  of deficit stimulus.  In other words, the country should create adequate levels of aggregate demand by spending more than it took in as taxes (<a href="/topic/188827/fiscal-policy">fiscal policy</a>).<br />
Also, Keynesianism held that aggregate demand could be stimulated up to a point by lowering interest rates (monetary policy).<br />
Application</p>
<p dir="auto">In the USA and other large industrial countries, fiscal and monetary policy has been attempted often.  After 1980, the Federal Reserve chair (Paul Volcker) was a monetarist, who claimed to reject Keynesianism.  Nobel laureates in economics almost unanimously attacked Keynesianism as outmoded and wrong-headed, but governments continue to use fiscal stimulus and interest rate cuts in response to recessions.</p>
]]></description><link>https://definedictionarymeaning.com/topic/209174/keynesianism</link><generator>RSS for Node</generator><lastBuildDate>Sun, 14 Jun 2026 08:57:57 GMT</lastBuildDate><atom:link href="https://definedictionarymeaning.com/topic/209174.rss" rel="self" type="application/rss+xml"/><pubDate>Sat, 10 Apr 2021 06:21:21 GMT</pubDate><ttl>60</ttl><item><title><![CDATA[Reply to Keynesianism on Wed, 29 Sep 2021 12:25:23 GMT]]></title><description><![CDATA[<p dir="auto">relating to the economic principles of John Maynard Keynes, especially the importance of having government plans to create jobs and encourage spending:</p>
]]></description><link>https://definedictionarymeaning.com/post/418011</link><guid isPermaLink="true">https://definedictionarymeaning.com/post/418011</guid><dc:creator><![CDATA[Lizzy Liz]]></dc:creator><pubDate>Wed, 29 Sep 2021 12:25:23 GMT</pubDate></item><item><title><![CDATA[Reply to Keynesianism on Sat, 10 Apr 2021 06:44:15 GMT]]></title><description><![CDATA[<p dir="auto">The economic theory or practice based on the ideas of the English economist John Maynard Keynes.</p>
]]></description><link>https://definedictionarymeaning.com/post/366064</link><guid isPermaLink="true">https://definedictionarymeaning.com/post/366064</guid><dc:creator><![CDATA[Sonia]]></dc:creator><pubDate>Sat, 10 Apr 2021 06:44:15 GMT</pubDate></item></channel></rss>