Question

Who is John Maynard Keynes and are there any problems with his theory? If there are problems can you list examples?

Answer 1

John Maynard Keynes was a british economist who fundamentally changed the economic principal and economic policy making. Before Keynes economists mainly supported supply side economics believing that supply will create its own demand that lead to the great depression.

He claimed that its the demand that matters and government intervention is important in the market to bring the economy back to the track when it by a recession. He advocated for active government policy, increasing the demand, less reliance on the monetary policy.

There are two examples of fault in his policy,

• when there is an increase in the cost of the inputs,i..e the situation of stagflation then keynesian theories fail.
• there is no liquidity trap in the economy and monetary policy works fine to increase the demand