John Maynard Keynes And The Great Depression

The Keynesian Consensus is an economic theory which was created by economist John Maynard Keynes in the 1930’s to explain the Great Depression . The theory is based on the acceptance of spending in the economy and the effect that it has on inflation and output . The rise of the Keynesian Consensus is attributed to the vulnerable market economy during the time of the Great Depression and its collapse could be credited to the disintegration of the Bretton Woods system and the Keynes Theory bringing the golden age into crisis . Keynes is known to be the main influence on the world’s free economies mainly in America . Keynes main theme was that contemporary capitalist economies don’t always work at their top efficiency he also believed that federal deficits of the 1930s, which was just over $3.5 billion per year, were too small to support the United States economy . The Keynes theory allowed for a greater government involvement in the nation’s economy . In 1965 the government carried out 2 stages in income-tax cuts which allowed the consumers to spend and corporations to invest and the Keynes theory used 3 tools to do this: credit policy, tax policy and budget policy . Keynes believed that the primal goal for an economy was full employment of materials, people and machines . Keynes theory fell under the study of “macroeconomics” . Keynes also believed that the only way to revive demands was to get the government to cut taxes, spend heavily and reduce interest rates