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Keynesian economics is an economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed by the British economist John Maynard Keynes during the 1930s in an attempt to understand the Great Depression. Keynes advocated increased government expenditures and lower taxes to stimulate demand and pull the global economy out of the depression. Read more: Keynesian Economics Definition | Investopedia www.investopedia.com... Follow us: Investopedia on Facebook
According to this classical theory, if aggregate demand in the economy fell, the resulting weakness in production and jobs would precipitate a decline in prices and wages. A lower level of inflation and wages would induce employers to make capital investments and employ more people, stimulating employment and restoring economic growth. The depth and severity of the Great Depression, however, severely tested this hypothesis. Read more: Keynesian Economics Definition | Investopedia www.investopedia.com... Follow us: Investopedia on Facebook
For example, Keynesian economics refutes the notion held by some economists that lower wages can restore full employment Read more: Keynesian Economics Definition | Investopedia www.investopedia.com... Follow us: Investopedia on Facebook
Instead, he envisaged economies as being constantly in flux, both contracting and expanding. This natural cycle is referred to as boom and bust. Read more: Keynesian Economics Definition | Investopedia www.investopedia.com... Follow us: Investopedia on Facebook
In response to this, Keynes advocated a countercyclical fiscal policy in which, during the boom periods, the government ought to increase taxes or cut spending, and during periods of economic woe, the government should undertake deficit spending Read more: Keynesian Economics Definition | Investopedia www.investopedia.com... Follow us: Investopedia on Facebook
Keynes also criticized the idea of excessive saving, unless it was for a specific purpose such as retirement or education. Read more: Keynesian Economics Definition | Investopedia www.investopedia.com... Follow us: Investopedia on Facebook
Keynesian economics focuses on demand-side solutions to recessionary periods. The intervention of government in economic processes is an important part of the Keynesian arsenal for battling unemployment, underemployment and low economic demand. The emphasis on direct government intervention in the economy places Keynesian theorists at odds with those who argue for limited government involvement in the markets. Read more: Keynesian Economics Definition | Investopedia www.investopedia.com... Follow us: Investopedia on Facebook
Lowering interest rates is one way governments can meaningfully intervene in economic systems, thereby generating active economic demand. Read more: Keynesian Economics Definition | Investopedia www.investopedia.com... Follow us: Investopedia on Facebook
Prices also do not react quickly, and only gradually change when monetary policy interventions are made. This slow change in prices, then, makes it possible to use money supply as a tool and change interest rates to encourage borrowing and lending. Read more: Keynesian Economics Definition | Investopedia www.investopedia.com... Follow us: Investopedia on Facebook
If the Burrito Index had tracked official inflation, the burrito at our truck should cost $3.38 — up only 35% from 2001. Compare that to today's actual cost of $6.50 — almost double what it "should cost" according to official inflation calculations.
According to official statistics, inflation has reduced the purchasing power of the dollar by a mere 6% since 2011: barely above 1% a year. We've supposedly seen our purchasing power decline by 27% in the 12 years since 2004 — an average rate of 2.25% per year.
Unbiased private-sector efforts to calculate the real rate of inflation have yielded a rate of around 7% to 13% per year, depending on the locale — many multiples of the official rate of around 1% per year.
So Kensyian economics is basically how Hitler and FDR brought their respective countries out of economic depression in the 1930's