UNIVERSITY OF GUYANA

FACULTY OF SOCIAL SCIENCES

CENTRE FOR COMMUNICTION STUDIES
DPC1207: FOUNDATIONS OF JOURNALISM: NATIONAL AND INTERNATIONAL
INSTITUTIONS
LECTURER: MR. M. E. BROTHERSON
STUDENT: FAITH GREENE
USI: 1034411

ASSIGNMENT: QUESTION: Outline and very briefly discuss the basic features (the very fundamental
principles) OF ONE OF the following:

(i) The Economic Theory of John Maynard Keynes.

John Maynard Keynes was a British Economist, who developed the Keynesian Economic theory in the
1930s in an attempt to understand the Great Depression. The Keynesian Economic theory is one of total
spending in an economy and its effects on output and inflation (Jim Chappelow, 2020). Keynes advocated
for increased government spending and lower taxes, to encourage demand and pull the world economy
out of the depression. Keynesian economics was later used to refer to the concept of optimal economic
performance being achieved, and economic falls prevented, by influencing aggregate demand through
supporting stabilization and economic intervention polices by the government. Aggregate demand (AD)
is defined by writer and editor for digital publications Will Kenton as the measurement of the total
amount of demand for all finished goods and services in an economy. It is expressed as the overall
amount of money exchanged for those goods and services at a specific price level and point in time.
Aggregate demand over the long-term equals the: Gross Domestic Product (GDP). GDP represents the
full number of products produced in any economy, while aggregate demand is the demand or desire for
those goods. AD consists of all consumer goods, capital goods, exports, imports, government spending
programmes. Keynesian economics depicts new ways of looking at spending, output and inflation.
According to this classical theory, if aggregate demand in the economy fell, it would result in weakness in
production and jobs would suddenly decline in prices and wages.
Keynes’s Economics was sometimes referred to as the depression economics. It is argued in classical
economic theory that output and prices will eventually return to a balanced state, however the Great
Depression appeared to have countered this theory, as output was low and unemployment remained high
during that period. Keynes refused the notion that the economy would go back to a state of balance and
instead he argued that once an economic downturn sets in, the fear and gloom it sets among businesses
and investors will become self-fulfilling, which can lead to a stable period of depressed economic activity
and unemployment. Keynes advocated for a countercyclical fiscal policy, which meant that during
periods of economic woe, governments should undertake the shortages in spending to make up for the
decline in investment and boost consumer spending in order to stabilize aggregate demand.
Keynes was extremely critical of British government at that time. The government cut welfare spending,
and raised taxes so as to balance the National Books. Keynes noted that it wouldn’t encourage people to
spend their money, and so leaves the economy uninspired and unable to recover and return to a successful
state. He criticized the notion of extreme saving unless for a specific purpose such as retirement or
education. Keynes saw it dangerous for the economy because the more money not spent, less money
stimulating growth in the economy.
Some economists believed that full employment could only be restored if wages are allowed to fall to
lesser levels. Keynesians however maintained that a business won’t employ workers to produce goods
that can’t be sold. They believed that unemployment resulted from a poor demand for goods and services.
Keynesianism coined this a “demand-side” theory that focused on short-run economic fluctuations.
Keynes further argues that investment, is the dynamic factor that determines the level of economic
activity. He maintained that deliberate government action could promote full employment.
In conclusion John Maynard Keynes created an economic theory that helped our world in numerous
ways. The British economist not only found a way to heal the world of the Great Depression, but gave
people an insight on what economics is all about. Keynes encouraged government to spend money to
create jobs for people, as more jobs meant less unemployment and more money in an economy. Keynes
main idea however was to use working government policies to manage aggregate demand, so as to
prevent economic recessions.

References

Jim Chappelow. (2020, April 30). Keynesian Economics . Retrieved from

https://www.investopedia.com/: https://www.investopedia.com/terms/k/keynesianeconomics.asp

Keynsian Economics. (2017, 18 April). Retrieved from Encyclopedia Brtiannica :

https://www.britannica.com/topic/Keynesian-economics

Will Kenton . (2020, April 08). Aggregate Demand . Retrieved from https://www.investopedia.com/:
https://www.investopedia.com/terms/a/aggregatedemand.asp