Question

What is the significance of the title The General Theory of Employment, Interest and Money, by J.M. Keynes? (Hint: focus on the works “General Theory”)

Answer 1

The General Theory of Employment, Interest and Money is the final book of the economist John Maynard Keynes in the year 1936. It is a very significant book. It brings a major shift in the field of economics by taking the scope of macro economics to the central portion of the theory of economics and initiate the Keynesial Revolution. This causes almost equally strong results in economic field as it brings great support for the expenditure incurred by Government, deficits in budget, intervention in money matters.

The main dispute of the General Theory deals with :

• the issue of employment level which is not decided by the labor price level instead by the aggregate demand level.
• the issue where the output is greater than demand, it will shorten the economy till the position of equality is attained. As per the decision of Keynes, total employment is not the automatic outcome of markets which is much competitive.

In conclusion it can be said that the General Theory deals against classical economics, which means traditional economics. The General Theory put forward the ideas relating to :

• preference given to liquidity
• function of consumption
• demand efficiency
• effectiveness of capital margin
• bring fresh importance to the multiplier.