12 Emergence of Macro-Economics
As a separate branch of economics, 'Macro Economics' emerged after the
British economist J.M. Keynes published his popular book. The General Theory of
Employment, interest and money' in 1936. Before Keynes, the prevailing thinking
was that all the labourers, who are ready to work will find employment and all the
factories will be working at their full capacity. This school of thought is known as the
classical tradition. However, the Great Depression of 1929 and the subsequent years
saw the output and employment levels in the countries of Europe and North
America fell to a great extent.
It affected other countries of the world as well. Demand for goods in the
market was low, many factories were lying idle, workers were thrown out of jobs. In
USA, from 1929 to 1933, unemployment rate rose from 3 percent to 25 percent
Over the same -period, the aggregate output in USA fell by about 33 percent. These
events made economists think about the functioning of the economy in a new way
The fact that the economy may have long lasting unemployment had to be
theorised about and explained. John Maynard book was an attempt in this
direction. Unlike his predecessors
, his approach was to examine the working of the
economy in its entirety and examine the interdependence of the different sectors
The subiect of macroeconomics was born.
Answers
Answer:
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Explanation:
John Maynard Keynes, 1st Baron Keynes[2] CB FBA (/keɪnz/ KAYNZ; 5 June 1883 – 21 April 1946), was a British economist, whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments. Originally trained in mathematics, he built on and greatly refined earlier work on the causes of business cycles, and was one of the most influential economists of the 20th century.[3][4] His ideas are the basis for the school of thought known as Keynesian economics, and its various offshoots.[5]
The Right Honourable
The Lord Keynes
CB FBA
Keynes 1933.jpg
Born
5 June 1883
Cambridge, Cambridgeshire, England
Died
21 April 1946 (aged 62)
Tilton, near Firle, Sussex, England
Nationality
British
Alma mater
Eton College
King’s College, Cambridge
Political party
Liberal
Spouse(s)
Lydia Lopokova
Academic career
Institution
King's College, Cambridge
Field
Political economyProbability
School or
tradition
Keynesian economics
Alma mater
King's College, Cambridge
Influences
Jeremy Bentham, Thomas Malthus, Alfred Marshall, Nicholas Johannsen, Knut Wicksell, Piero Sraffa, John Neville Keynes, Bertrand Russell[1]
Contributions
Macroeconomics
Keynesian economics
Liquidity preference
Spending multiplier
AD–AS model
Demand-side economics
During the Great Depression of the 1930s, Keynes spearheaded a revolution in economic thinking, challenging the ideas of neoclassical economics that held that free markets would, in the short to medium term, automatically provide full employment, as long as workers were flexible in their wage demands. He argued that aggregate demand (total spending in the economy) determined the overall level of economic activity, and that inadequate aggregate demand could lead to prolonged periods of high unemployment. Keynes advocated the use of fiscal and monetary policies to mitigate the adverse effects of economic recessions and depressions. He detailed these ideas in his magnum opus, The General Theory of Employment, Interest and Money, published in 1936. By the late 1930s, leading Western economies had begun adopting Keynes's policy recommendations. Almost all capitalist governments had done so by the end of the two decades following Keynes's death in 1946. As a leader of the British delegation, Keynes participated in the design of the international economic institutions established after the end of World War II but was overruled by the American delegation on several aspects.
Keynes's influence started to wane in the 1970s, partly as a result of the stagflation that plagued the Anglo-American economies during that decade, and partly because of criticism of Keynesian policies by Milton Friedman and other monetarists,[6] who disputed the ability of government to favourably regulate the business cycle with fiscal policy.[7] However, the advent of the global financial crisis of 2007–2008 sparked a resurgence in Keynesian thought. Keynesian economics provided the theoretical underpinning for economic policies undertaken in response to the financial crisis of 2007–2008 by President Barack Obama of the United States, Prime Minister Gordon Brown of the United Kingdom, and other heads of governments.[8]
When Time magazine included Keynes among its Most Important People of the Century in 1999, it stated that "his radical idea that governments should spend money they don't have may have saved capitalism."[9] The Economist has described Keynes as "Britain's most famous 20th-century economist."[10] In addition to being an economist, Keynes was also a civil servant, a director of the Bank of England, and a part of the Bloomsbury Group of intellectuals.[11]