What is Keynesian macroeconomics?

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Keynesian economy has been popular in many countries since World War II, while economists who practice this theory make the difference between private and public sectors. The greatest pressure for Keynesian theory is the ability of the public sector-namely federal government-to start the economy. Theoretically monetary and fiscal policy in Keynesian macroeconomics stabilizes the trade cycle and prevents economic decline or troughs. Thanks to the increased government expenditure, the theory states that any inefficiency of standard economic theory disappears when the government raises the test. In short, Keynesian economists believe in a mixed economy than in a completely free market. Keynes believed in nominal wages between the employer and the employee such as an exchange relationship. This relationship would be difficult, because there would be no government intervention in the economy, saving laws on minimum wages. To increase employment, actual wages - nominal wages of refraConsidered price changes over the period of time - had to drop. As a result, sales sales would decrease how consumer demand has dropped, which would create a balance in supply and demand curves.

Expenditure - or rather its lack - could be another problem on the market. When individuals do not take all their income, they can place them on a bank account as savings. Investments in long -term projects would decrease because of the fact that this money is not in general use of the overall market. Keynesian macroeconomics therefore demanded changes in employees' wages, as described above, where the money obtained from employment would meet the consumer need for expenses. The argument for excessive savings, as Keynes called it, would deal with interest rates in the business environment; He therefore described complex models that outlined the policies of these effects.

of these two previous theories have emerged faith ingovernment intervention on the market. When consumer expenditure or wages fell too low, the lack of purchasing power would cause bad effects in the economy, such as high depression. Keynesian macroeconomics then determined the ability to remedy this problem to the government. The government could increase the expenditure and soak up the entire excess product on the market. This covers the inefficiency of excessive markets and the lack of consumer demand.

The problem with Keynesian macroeconomics is that prices and wages do not bend as much as the first meant. Government intervention - through monetary or fiscal policy - may not help immediately. Therefore, the prolonged effects of these policy changes may worsen or help at all, depending on the current economic conditions.