- Write about the principle of income and employment policy?
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Income and employment theory, a body of economic analysis concerned with the relative levels of output, employment, and prices in an economy. By defining the interrelation of these macroeconomic factors, governments try to create policies that contribute to economic stability. Income and employment theory. Economics. This is also called the theory of income determination or the theory of employment. ... Thus, in the short run, the factors that would determine the economy's level of national income would also determine its level of employment. Hence, the theory of income determination is also called the theory of employment.
The modern theory of income and employment, for which we may thank the genius of J. M. Keynes (1936), is without question the most important advance in economic analysis in the twentieth century. Keynes taught us to understand the nature of depressions and radically changed our thinking about how to deal with them. Keynesian principles have been widely applied in the policies of most industrialized countries, and governmental responsibility for the maintenance of “full employment” is now generally accepted. In the United States the growing influence of the “new economics” led, in 1946, to the passage of the Employment Act, which created the Council of Economic Advisers and committed the federal government “to promote maximum employment, production, and purchasing power.”
The modern theory of income and employment, for which we may thank the genius of J. M. Keynes (1936), is without question the most important advance in economic analysis in the twentieth century. Keynes taught us to understand the nature of depressions and radically changed our thinking about how to deal with them. Keynesian principles have been widely applied in the policies of most industrialized countries, and governmental responsibility for the maintenance of “full employment” is now generally accepted. In the United States the growing influence of the “new economics” led, in 1946, to the passage of the Employment Act, which created the Council of Economic Advisers and committed the federal government “to promote maximum employment, production, and purchasing power.”In addition to its profound influence on economic policy, the modern theory of income and employment has paved the way for important developments in many areas of economic analysis. The purpose of the present essay is to provide a broad, simple outline of the theory. Many subtleties and extensions have necessarily been glossed over or omitted completely. [The interested reader is urged to consult the separate articles on topics treated only briefly in this article:Consumption Function; Employment AND Unemployment; Fiscal Policy; Inflation AND Deflation; Interest; Investment; Liquidity Preference; Monetary Policy; andMoney.]
The modern theory of income and employment, for which we may thank the genius of J. M. Keynes (1936), is without question the most important advance in economic analysis in the twentieth century. Keynes taught us to understand the nature of depressions and radically changed our thinking about how to deal with them. Keynesian principles have been widely applied in the policies of most industrialized countries, and governmental responsibility for the maintenance of “full employment” is now generally accepted. In the United States the growing influence of the “new economics” led, in 1946, to the passage of the Employment Act, which created the Council of Economic Advisers and committed the federal government “to promote maximum employment, production, and purchasing power.”In addition to its profound influence on economic policy, the modern theory of income and employment has paved the way for important developments in many areas of economic analysis. The purpose of the present essay is to provide a broad, simple outline of the theory. Many subtleties and extensions have necessarily been glossed over or omitted completely. [The interested reader is urged to consult the separate articles on topics treated only briefly in this article:Consumption Function; Employment AND Unemployment; Fiscal Policy; Inflation AND Deflation; Interest; Investment; Liquidity Preference; Monetary Policy; andMoney.]Meaning of unemployment. It is important at the outset to be clear about the meaning of unemployment. Full employment implies that all who wish to work at the existing level of wage rates are employed. There are, to be sure, potential workers who choose not to seek employment because wage rates are too low. But such persons are said to be voluntarily unemployed, and the theory of employment is not concerned with them; rather, it is concerned with involuntary unemployment—with a situation in which there are workers who would be willing to take employment at prevailing wages but cannot find it.
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