ABSTRACT
This chapter explains the Progressive view of how the macroeconomy functions. It discusses how a Progressive view of macroeconomics is completely different from Classical view; how John Maynard Keynes refuted Say's law; and how Progressives respond to the Classical view that saving and investment will be equalized at the equilibrium interest rates. The chapter also discusses how Progressives respond to the traditional view that a cut in wages will reestablish equilibrium with full employment; and how Progressives respond to Classical explanations for unemployment and recession. Many economists argue that government provision of unemployment compensation payments actually increases unemployment by making it easier for the unemployed to wait around hoping for a better job opportunity. The chapter discusses the aggregate labor market to better examine unwanted unemployment and underemployment. Effective demand, a concept coined by Keynes, means that consumers must have not only a desire for goods and services but enough income to buy a given product at the market price.
