John Maynard Keynes Flashcards, test questions and answers

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What is John Maynard Keynes?

John Maynard Keynes was one of the most influential economists and thinkers of the 20th century. His work in macroeconomics shaped how we think about government spending, taxation, international trade and inflation. He is best known for his ideas on how to reduce unemployment during economic recessions. He argued that governments should intervene in markets by increasing their spending or cutting taxes when faced with a recession, which he dubbed the paradox of thrift . This idea served as the basis for what became known as Keynesian economics, which became a central part of modern monetary policy after World War II. Keynes was born in Cambridge, England in 1883 and was educated at Eton College before attending King’s College, Cambridge where he studied mathematics and political economy. He began working at The Nation magazine soon after graduating from college and later joined the British Treasury during World War I. After the war ended, he returned to academia as a lecturer at Cambridge University and wrote extensively on topics such as money management, banking regulation, public finance and foreign exchange rates throughout his career. In 1936 he published his magnum opus – The General Theory of Employment, Interest and Money which aimed to explain why economies can remain stuck in periods of high unemployment even though there is no shortage of capital available for investment projects. His book had an immense impact on both academic thought (through its heavy influence on John Hicks’ IS-LM model) as well as public policy: it provided much needed ammunition against classical economics’ belief that the free market could always be relied upon to bring full employment without government intervention if necessary The Great Depression further cemented Keynes’ reputation as an economist who understood how deep recessions worked better than anyone else alive at that time providing solutions that allowed governments around the world to tackle high levels of unemployment with relative success. Overall John Maynard Keynes will forever be remembered for having changed our understanding of macroeconomics.