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Conclusions from Keynesian Model - Recession
A modern industrial economy can get “stuck” in a long recession with very high unemployment. The economy will NOT automatically correct itself.
Note that this described The Great Depression rather well.
Conclusion: The economy gets stuck in a high-unemployment recession because firms and households become pessimistic about the future and reduce their spending. Savings replace Consumption, and firms refuse to Invest.
THE Rx: Government policy to “manage” Aggregate Demand.
Let’s see how it works……