ABSTRACT
For most of the first three decades after World War II, Keynesian orthodoxy reigned. The Keynesian view that periodic slumps in the economy could and should be offset by government efforts to stimulate the demand for goods went virtually unquestioned, and many economists began to think and act as though fluctuations in business activity were only a feature of the past, pre-Keynesian era. With the new economic logic maintaining that depressions were unnecessary and could always be headed off by appropriate use of public policy, a good many Americans came to believe in the 1960s that we were now "depression-proof." However, events in the mid-1970s prompted a reexamination of the New Economics. Although no depression developed, the economy did suffer through stagflation as economic growth slowed, unemployment rates rose, and price inflation gnawed deep into the economy.
