ABSTRACT
Unemployment and inflation are the two central economic problems as they touch the lives of almost everyone. Unemployment is at the centre of much of the troubles of a modern economy. Theoretical understanding is necessary to help policy intervention. It is very likely that you would doubt the above claims about employment and the labour market. Though they sound logical, they do not fit observations—the long periods of unemployment and recession that arise from time to time. J. M. Keynes was one of the first economists well-versed in the classical theory to doubt and challenge it from within the tradition. Classical economics did not spare much thought for unemployment because it believed that it always ends through the normal functioning of markets. Keynes gave a theoretical explanation of unemployment as a possible equilibrium state. His explanation was complemented by policy suggestions of aggressive government spending.
