This document is an analytical essay that discusses the significance of John Maynard Keynes' economic theory, particularly its impact during the Great Depression and its lasting influence on modern economic systems. The essay explores how Keynesian economics, which emphasizes government interventio...
Before the time of the Great Depression, there were no programs or insurance companies that were
made for the people. This was then highlighted as the Great Depression commenced and the majority of banks
collapsed, twenty-five percent of the workforce was laid off, and productivity dropped. People not only lost
faith in the government but also in banks. As the financial market crashed many individuals started to pull their
money, creating a domino effect for all. With the majority of the people saving their money in fear of another
crash, the economy was not experiencing any growth. The output remained low as employment continued to
rise. With the inability to save, the economy continued to plummet, this, later on, changed with the inauguration
of Franklin Delano Roosevelt and his administration of Keynesian economics, would forever change history.
John Keynes's economic theory is the most prominent in the 20th century, implementing his theory to help
combat the effects of the Great Depression further proves why his philosophy is preferred.
The purpose of Keynesian economics is to stabilize the economy through government interaction.
According to Investopedia, " Keynesian economics was used to refer to the concept that optimal economic
slumbs could be prevented - by influencing aggregate demand through economic intervention by the
government”. This theory proposes government spending and a tax break are required in order to increase
economic activity. Not only did Keynesian economists believe in government mediation through public policies
but they also stressed the perils of savings. As mentioned in an article written by Investopedia, states, "
Keynesian economics is a macroeconomic theory of total spending in the economy and its effects on output,
employment, and inflation”. Total spending can significantly determine economic outcomes, from production to
employment rate. Keynes's theory went against savings, his approach presented that the lack of spending would
cause an economic downturn. He describes this as a cycle, the money deficiency could potentially cause
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