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Keynesian Theory

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Applied Macroeconomics

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Abstract

We now want to deal with the theory that has called into question the ideal world of neoclassicism. Neoclassicism was the only valid macro theory until the world economic crisis of 1929 and thus:

  • permanent investment break

  • as a result, overcapacities

  • continued mass unemployment

    (approx. 6 million in 1932 in Germany)

  • a contraction of consumption, world production and world trade

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Notes

  1. 1.

    Published in “Die Rheinlandpfalz am Sonntag”, 16.11.2008, p. 19. Translated from German.

  2. 2.

    See Keynes, John Maynard (1937, p. 121).

  3. 3.

    See Eller, R. et al. (eds.) (2005).

  4. 4.

    See Hicks, J. R. (1937).

  5. 5.

    If one were to keep the equilibrium income Y1 constant, the new LM curve would show that the interest rate would have to rise so far that the speculative demand for money has declined in favor of the unchanged transactional demand for money.

  6. 6.

    The positive effect of an increase in real asset values of households on consumption at falling prices is also referred to as the Pigou effect.

  7. 7.

    See Shiller, Robert (2007); Gold, Gerry/Feldmann, Paul (2007); Muolo, Paul/Padilla, Matthew (2008); Woods, Thomas E. (2009); http://www.amazon.de/s/ref=ntt_athr_dp_sr_1?_encoding=UTF8&field-author=Financial%20Crisis%20Inquiry%20Commission&search-alias=books-de-intl-us&sort=relevancerank. Financial Crisis Inquiry Commission (2010) and Conrad, Christian, A. (2010).

  8. 8.

    This requires that there are enough investments with a positive return. This may, for example, in an open economy with lack of competitiveness is not the case.

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Authors and Affiliations

  1. Hochschule für Technik und Wirtschaft des Saarlandes, Saarbrücken, Deutschland

    Christian A. Conrad

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Correspondence to Christian A. Conrad .

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Conrad, C. (2022). Keynesian Theory. In: Applied Macroeconomics. Springer, Wiesbaden. https://doi.org/10.1007/978-3-658-39315-1_6

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