ABSTRACT
A unifying characteristic of Keynesian theory is the emphasis placed on aggregate demand movements in generating fluctuations in output, employment and unemployment. In the General Theory, Keynes gave prominance to changes in business confidence which can alter the level of aggregate demand for goods, thereby providing a stimulus for changes in output and employment at the aggregate level. Keynes clearly interpreted his analysis as providing an alternative to the then dominant supply-constraint theories of the determination of output and employment levels in the short run.(1)
In particular, Keynes attempted to discredit classical theory which attributed much, if not all, of the unemployment observed during the 1920s and 1930s to relatively rigid money and real wage rates. Early on in the General Theory he criticises classical theory for suggesting that:
…apparent unemployment…must be due at bottom to a refusal by the unemployed factors to accept a reward which corresponds to their marginal productivity.
