What Is the Keynesian Model?
The Keynesian model is a set of economic theories pioneered by John Maynard Keynes. The model works on the belief that the private sector does not always produce the most efficient results for the economy as a whole. It therefore promotes a degree of state intervention to influence the economy, most notably to manage the effects of the business cycle of growth and recession. The practical application of the Keynesian model lies somewhere between a purely market-based economy and a purely state-controlled economy, and thus covers the position of most major countries in the 21st century. Early economic theories worked on the basis that individuals making decisions would always act rationally and that the market as a whole would in turn work efficiently. Keynes argued that there were several barriers to this happening. One of these is that human nature means people are more concerned with the actual amount of their wages than the real terms value of their income, taking into account price
Related Questions
- Would like to know about how the simple Keynesian cross model may be solved for a unique equilibrium level of national income. And What impact a fall in interest rate would have on the equilibrium?
- What is the role played by fixed prices in the keynesian model of income determination?
- What is the Keynesian model of income determination?
