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Encyclopedia > General Theory of Employment Interest and Money

The General Theory of Employment, Interest and Money is generally considered to be the masterwork of the English economist John Maynard Keynes. To a great extent it created the terminology of modern macro-economics. It was published in February 1936. The book ushered in a revolution, commonly referred to as the "Keynesian Revolution", in the way economists thought about the economy, and especially how they thought about the feasibility and wisdom of public sector management of the aggregate level of demand in the economy. John Maynard Keynes (right) and Harry Dexter White at the Bretton Woods Conference John Maynard Keynes, 1st Baron Keynes, CB (pronounced kānz / kAnze) (June 5, 1883 – April 21, 1946) was a British economist whose ideas had a major impact on modern economic and political theory as well as on... Macroeconomics is the study of the entire economy in terms of the total amount of goods and services produced, total income earned, the level of employment of productive resources, and the general behavior of prices. ... 1936 (MCMXXXVI) was a leap year starting on Wednesday (link will take you to calendar). ... Keynesian economics, or Keynesianism, is an economic theory based on the ideas of John Maynard Keynes, as put forward in his book The General Theory of Employment, Interest and Money, published in 1936 in response to the Great Depression of the 1930s. ...


In Keynes' book Essays in Persuasion he looked back on his frustrating attempts to influence public opinion during the Great Depression of the early 1930s. The "General Theory" represented Keynes's attempt to shift opinion by altering the framework of thought in macro-economics. Dorothea Langes Migrant Mother depicts destitute pea pickers in California, centering on Florence Owens Thompson, a mother of seven children, age 32, in Nipomo, California, March 1936. ...


Briefly, the "General Theory" argued that the level of employment in a modern economy was determined by three factors: the marginal propensity to consume (the percentage of any increase in their income that people chose to spend on goods and services), the marginal efficiency of capital(dependent on anticipated rates of return) and the rate of interest. Keynes's key arguments included that in an economy bedevilled by weak demand (e.g. a depression), where in his terminology there was an ignition problem (a difficulty in getting the economy to move forward more vigorously), then the government (more broadly the public sector) could increase aggregate demand by increasing its expenditures, including by borrowing to finance the expenditures, and that the public-sector borrowing would not increase interest rates sufficiently to undermine the effectiveness of such a policy. Deficit spending is the amount by which a government, private company, or individuals spending exceeds income over a particular period of time, also called simply deficit, or budget deficit, the opposite of budget surplus. ...


Keynes forecast in the "General Theory" that his book was likely to lead to a revolution in the way men of affairs thought about public policy, and Keynesianism (government attempts to affect demand through tax, expenditure and borrowing and monetary policy) was enormously influential in the post-Second World War period. The stagflation of the 1970s made Keynes's interventionist approach less fashionable with politicians and economic theorists. In most economies it came to be believed that Keynesian demand management was difficult, and that it had subtle damaging effects including undermining the advantages of sound finance (balanced budgets) and encouraging inflation. To some extent Keynesianism suffered from its own success in that the post-war period largely avoided periods of devastating unemployment and lost production. However, Keynesianism still shows up in the form of new Keynesian economics, which attempts to merge neoclassical economics with some Keynesian policy conclusions. Keynesian economics, or Keynesianism, is an economic theory based on the ideas of John Maynard Keynes, as put forward in his book The General Theory of Employment, Interest and Money, published in 1936 in response to the Great Depression of the 1930s. ... Fiscal policy is the economic term which describes the actions of a government in setting the level of public expenditure and how that expenditure is funded. ... Monetary policy is the government or central bank process of managing money supply to achieve specific goals—such as constraining inflation, achieving full employment or economic growth. ... Stagflation is a term in macroeconomics used to describe a period characteristic of high inflation combined with economic stagnation, unemployment, or economic recession. ... The 1970s decade refers to the years from 1970 to 1979, inclusive. ... New Keynesian economics developed partly in response to new classical economics. ... Neoclassical economics refers to a general approach (a metatheory) to economics based on supply and demand which depends on individuals (or any economic agent) operating rationally, each seeking to maximize their individual utility or profit by making choices based on available information. ...


At his best Keynes was a wonderful craftsman of the English language and his wonderful fluency of usage is in evidence at times in the General Theory, e.g. Chapter 12 dealing with "The State of Long Term Expectation" is considered by some as an example of the best single chapters about the stock market. However, much of the book shows Keynes at his worst in terms of the English language with long complicated sentence structures uncharacteristic of his style of writing seen in previous books and articles


See also

A Keynesian beauty contest is a concept developed by John Maynard Keynes and introduced in his masterwork, General Theory of Employment Interest and Money (1936), to explain price fluctuations in equity markets. ...

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  Results from FactBites:
 
General Theory of Employment Interest and Money - Wikipedia, the free encyclopedia (459 words)
The General Theory of Employment, Interest and Money is generally considered to be the masterwork of the English economist John Maynard Keynes.
The "General Theory" represented Keynes's attempt to shift opinion by altering the framework of thought in macro-economics.
Keynes forecast in the "General Theory" that his book was likely to lead to a revolution in the way men of affairs thought about public policy, and Keynesianism (government attempts to affect demand through tax, expenditure and borrowing and monetary policy) was enormously influential in the post-Second World War period.
  More results at FactBites »

 
 

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