keynesianism

Keynesian economics

Keynesian economics

The essential element of Keynesian economics is the idea the macroeconomy can be in disequilibrium (recession) for a considerable time. Keynesian economics advocates higher government spending (financed by government borrowing) to help recover from a recession. Keynesian economics includes Disequilibrium in macro economy (insufficient demand) Imperfect labour markets (e.g. Sticky wages) Paradox of thrift (in recession, individuals save more, but this worsens the economic downturn Liquidity trap. When low-interest rates fail to boost…