Background
The Economist who developed the Keynesian Economic Theory.
Who is John Maynard Keyne?; a British economist who rose to fame for his economic theory during the Great Depression.
The idea that by increasing aggregate demand, this rate will decrease.
What is the unemployement rate?
The two ways in which the government can intervene in Keynesian economics.
What is Monetary and Fiscal Policy?
Monetary policy: Increasing or decreasing the money supply to either speed up or slow down the economy.
Fiscal policy: Governments revenue collection and spending decisions.
The government does not recive the benefit from giving out the "future money."
What is government debt?; Setting fire to money.
The Great Depression.
What is the time period from 1929 to 1939?; Unemployment was high, demand was low, and production decreased.
The most important driving force of the economy.
What is Aggregate Demand?; Consumption, Investment, Government Spending, and Total Exports, minus Total Imports or vis versa.
The money given to producers.
What is supply stimulus?
The unpredictable political games.
What is the unpredicted time it will take for congress to act appropriately. i.e. how much money should the government supply?
The economic theory Keynes was against.
What is Classical economic theory?; Previous economic theory believed the economy would fix itself during the boom and bust cycle.
The place where the money comes from to help the economy.
Who is the government?; Government spending is an important idea. When times are good the government should increase taxes and cut government spending. When times are bad the government should decrease taxes and increase government spending. Creating a constant equilibrium.
The "future" money the government has.
What is deficit spending?; government borrows the money from the future.
The consquence of people not taking lower wage jobs.
What is unemployment?
The Inevitable.
What is the boom and bust cycle?; Keynes believed that the boom and bust cycle was inevitable, however Keynesian economics could make the cycle hit less extreme lows and highs. Also, decrease the time in which recovery would take place.
The ananolgy used when government stimulates the economy through government spending and intrest rate and tax reductions.
What is Priming the Pump?
The action of putting money into the hands of consumers.
What is Demand Stimulus?; Consumers with the money will put money back into the economy. While simoutansly creating a demand for goods. This ensures that the money is not just being put back into the economy but rather into the hands of consumers and future entrepreneurs.
The act of hypothesizing what will happen tomorrow.
What is predicitng the future?; Keyneisan economists are not always able to accuratley predict the future. Whether that be when a reccesion will occur or what the outcome will be for governemnt spending.
The idea of keeping money when times get rough.
What is the Psychology of Fear?; People would hold onto their moeny because they were scared they would loose it if they put it into the economy during times of recessions.
The main two driving points for an economic depression.
What are excessive savings and a decrease in aggregate demand? When individuals have an excessive amount of savings the money is not being placed into the economy therefore the overall income of the economy is decreasing.
The least favorable policy.
What is Intrest Rate Policy?; Lower, borrowrs will find it easy to pay back...borrow more...spend more. Higher, borrowers will find it harder to pay back...borrow less...spend less.
The negative effect of increased public sector spending on the private sector.
What is Crowding Out?; When the government "crowds out" private sector spending as the govenrment increases their own spending.