Question

After defining what is the "Keynesian revolution" and the contributions of "The general theory of employment, interest and money" by Keynes, you will explain how this revolution gave rise to "Keynesianism" and how the classic counterrevolution developed in response to Keynesianism, giving rise to the new classical macroeconomics.

Answer 1

The Keynesian Revolution is a basic remaking of economic theory concerning the details deciding employment levels in the entire economy. And it is one of the most important events in the entire history of economic growth. Before Keynes, Before Keynes, Classical Economic Theory was constructed by three principles: Unemployment, the Quantity Theory of Money and the third principle is that private investors directly find the correct investment ways to create the best economic outcomes for the future.

The General Theory of Employment, Interest and Money of 1936 is the final and most imperative by the English economist John Maynard Keynes. It made a significant move in financial thought, giving macroeconomics an important place in economic theory and contributing much of its wording: the "Keynesian Revolution". It supported a cure for financial retreat based on a government sponsored approach of complete employment. Whereas a few economists contend that full employment can be reestablished in the event that compensation are permitted to drop to lower levels, Keynesians keep up that businesses will not utilize laborers to deliver products that cannot be sold. Since they accept unemployment comes about from a deficiently request for merchandise and administrations, Keynesianism is considered a “demand-side” hypothesis that centers on short run financial variances.

Keynes contended that investment, which reacts to fluctuations in the interest rate and to expectations about the up comings, is the energetic figure deciding the level of financial movement. He also kept up that deliberate government action could encourage full employment. Keynesian economists argue that the government can directly control the demand for goods and services by changing tax policies and public spending.

The financial speculations and programs attributed to John M. Keynes and his followers specifically known as Keynesianism. In specific it is the promotion of money related and financial programs by government to extend employment and expenditures.

Keynesianism was the most financial tenet from 1936 until the approach of Monetarism, with which it coexisted until the crisis of the seventies. Joan Robinson, Nicholas Kaldor and John R. Hicks, are fair a few of the great disciples of Keynes, and thus Keynesian financial specialists, primarily from the Cambridge School in its not neoclassical meaning, to title a few.

What followed Keynes’ theoretical revolution was the rapid emergence of a
counter-revolution and it's characterization was “mainstream Keynesianism”. The counterrevolution began in 1937 with the investment-saving/liquidity-money (IS-LM)
theory, the idea of John Hicks.