ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Keynes believed that economies experiencing high unemployment should adopt policies to reduce the money supply.

Detailed explanation-2: -The main plank of Keynes’s theory, which has come to bear his name, is the assertion that aggregate demand-measured as the sum of spending by households, businesses, and the government-is the most important driving force in an economy.

Detailed explanation-3: -As a result, he began advocating for government intervention to curb unemployment and correct economic recession. In addition to government jobs programs, he argued that increased government spending was necessary to decrease unemployment-even if it meant a budget deficit.

Detailed explanation-4: -The Keynesian theory of employment states that the cause of unemployment is the deficiency of effective demand, and unemployment can be removed by raising effective demand. With the increase in effective demand, the production in the economy goes up.

Detailed explanation-5: -According to Keynes, aggregate demand could be too low in an economy. What does this mean? It means spending in the economy is too low to bring about full employment. According to Keynes, the private sector (by itself) Cannot always move the economy out of a recessionary gap.