Keynesian School of Thought

KeynesianSchool of Thought

Question1:HistoricalBackground of the School

The was introduced by John Maynard Keynes whowas a British economist. This school was developed during the 1930swhen the world experienced the Great Depression. The main aim ofdeveloping the school was to understand the Great Depression and comeup with ways on how to address it. In his understanding, Keynesargued that decreasing the taxes and an increase in the expenditureof the government could go a long way in stimulating demand and helpthe global economy overcome depression. In his opinion, Keynesbelieved that the world had the capacity to achieve what he referredas optimal performance in the economy. This was a crucial strategysince it would help in preventing the slumps in the economy, whichwere being experienced in most parts of the globe (Brue and Grant477).

Question2: Major Tenets of the School

Basedon the , it can be argued that supply iscreated by demand. In addition, the theory postulates the economy islargely influenced by the aggregate demand. This is becauseemployment levels, as well as levels of output, are influenced byaggregate demand. Keynes believed that the amount of productsproduced by businesses is dependent on what will be bought orconsumed by the customers. The classical model of this school ofthought proposes that the needs of the consumer are insatiable. Assuch, there is a tendency for consumers to engage in the exchange oflabor for income that will be used in the purchase of goods andservices. The school also argues that there are differences betweenmacroeconomics and microeconomics. What appears logical at anindividual level might seem illogical at an aggregate level (Brue andGrant 479).


Brue,Stanley and Grant, Randy. TheEvolution of Economic Thought.London: Cengage Learning, 2012. Print.