Keynesian Economics

Named after British economist John Maynard Keynes, Keynesian economics refer to an amalgamation of theories regarding economic behaviour.

The birth of his theories came as a result of the Great Depression and they were an attempt to rationalize and make sense of the market. This school of thought investigates the patterns of total spending in an economy and its short-run impact on output and inflation.

The underlying principle of Keynesian Economics is that changes in aggregate demand have an immediate impact on output and employment, not prices. According to Keynes, the optimal state of the economy could be achieved by regulating demand through appropriate government policies.