Keynesian Economics
What is Keynesian Economics?
The school of thought that total demand drives output and employment in the short run, and that policy can stabilize it.
Understanding Keynesian Economics
Based on John Maynard Keynes's 1936 General Theory, Keynesian economics holds that economies can stay in recession with high unemployment because demand is too low, and that government spending and monetary policy can help.
Modern New Keynesian models combine this with rational expectations and price stickiness, and they underpin most central bank models today.