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Answer:
Dear
T. Quinn,
We
hear now and then about the British economist, John
Maynard Keynes because he came forth with a new
economic theory back in the thirties.
Keynes
presented his theory, called Keynesian economics,
in his book The General Theory of Employment, Interest
and Money, published in 1936. Not only was his
idea new but it was also considered a truly revolutionary
theory at the time.
According
to Keynes, general trends, which he referred to as
macro-level trends, could overwhelm the micro-level
behavior of individual people.
So,
instead of the economic process being based on continuous
supply side improvements in potential output,
which was the popular thought at the time, Keynes
believed that the aggregate or total demand
for goods was the driving factor in a country's economy.
Based
on this approach, Keynes argued that government policies
could and should be used to promote demand at a macro
level and thus fight high unemployment. (High unemployment
was "the" concern right after the Great Depression
and at the time when he published his book.)
Specifically,
he believed that government intervention could help
the economy achieve full employment and stable prices
-- that governments should use deficit spending in
order to bring about economic recovery.
His
theory was used by President Franklin D. Roosevelt
as a means to economic recovery during the Great Depression
-- as seen in his many New Deal Programs -- where
government spending provided new jobs, higher overall
spending by businesses and individuals and eventually
a healthier economy.
Keynes'
ideas dominated economics for the next 40 years, reaching
a high point as a guide for federal government policy
in the 1960s. At that time, President Richard Nixon
said, "We're all Keynesians now."
The
approach fell out of favor in the 1970s and 1980s
as monetarism, neoclassical economics and supply-side
economics became more widely accepted.
Stay
tuned....we'll discuss supply-side economics next
week.
Happy
New Year!
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