Answer to Question #95246 in Macroeconomics for komal

Question

1. explain how the origins of the Keynesian revolution can be found in the problem of unemployment.

Answer 1

Keynesian Theory in Relation to Unemployment Problem

High unemployment rate in most industrialized countries according to Keynesian theory is as a result of shortage of aggregated demand.The low aggregated demand is due to lack of investiment opportunities and its demand in the economy. To solve the problem of high unemployment ,Keynes resolved for aggregate demand stimulus. Keynes was in agreement with expansionary fiscal policy measures, specifically raising government spending to increase the aggregated demand.If the government spending increases then the levels of income also increase thus, the consumption spending for public workers stimulates the need for secondary employment. Therefore the origin of Keynesian theory supported by fiscal and monetary policies.

reference.

Chegg."Macroeconomics Theories and Policies" 10th edition(edited edition) chapter 5.