ABSTRACT
John Maynard Keynes’s overarching argument in The General Theory of Employment, Interest and Money is that the market economy is inherently unstable, and liable to prolonged recessions and depressions. As Keynes writes, it is “primarily a study of the forces which determine changes in the scale of output and employment as a whole.” Keynes argues that government could solve the Great Depression by increasing the “inducement to invest,” either by reducing interest rates (monetary policy) or spending money on infrastructure (fiscal policy). He presents his ideas by picking apart many of the underpinnings of classical economic theory and proposing a new way of thinking about how a market economy functions. Keynes’s The General Theory also implies that there is a role for governments in managing and stabilizing the general economy. By intervening through fiscal policy and monetary policy, the government can increase aggregate demand.
