ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Keynesians believe that, because prices are somewhat rigid, fluctuations in any component of spending-consumption, investment, or government expenditures-cause output to change. If government spending increases, for example, and all other spending components remain constant, then output will increase.

Detailed explanation-2: -Keynesian economists think that income is the key determinant of consumption and spending. The Keynesian consumption function expresses consumption as a function of current income.

Detailed explanation-3: -Keynesian economics focus on using active government policy to manage aggregate demand to address or prevent economic recessions. Keynes developed his theories in response to the Great Depression and was highly critical of previous economic theories, which he referred to as classical economics.

Detailed explanation-4: -British economist John Maynard Keynes believed that classical economic theory did not provide a way to end depressions. He argued that uncertainty caused individuals and businesses to stop spending and investing, and government must step in and spend money to get the economy back on track.