11-BE-3-DAO XIANG DING.docVIP

Assignment Keynesian economics BD21331668193 DAO XIANG DING December 30, 2011 Table of Content 1 Abstract 3 2 Keynesian economics 4 2.1 Main concept 4 2.2 Examples 5 2.3 History 6 3 Exit plan 7 4 Appendix 9 4.1 References 9 Abstract This assignment shows the understanding about Keynesian economics including the history, main concepts and real life examples. With the help of study it is better to understand the measures that were taken in financial crisis and is able to analyze the impacts of measures better. An exit plan for a business should be a part of business plan to ensure that there was always a way to get out bad situation accordingly. Keynesian economics Main concept The theories forming the basis of Keynesian economics were first presented in The General Theory of Employment, Interest and Money, published in 1936 by Keynes, John Maynard.[1] A Keynesian theory believed that trend of macroeconomics directed individual’s behavior. It recommended countries made use of expansion economic policy to promote development of economy by increasing demands. And it believed that business recession was due to lack of demand. The level of production and employment was up to level of aggregate demand of the whole economics.[2] Keynesian economics advocates active policy responses by the public sector, including monetary policy actions by the central bank and fiscal policy actions by the government to stabilize output over the business cycle.[3] That is, a change should be made to level of expenditure accordingly in order to close fully employment with stable price of goods. When there was a very low level of aggregate demands, government should take expansionary fiscal policy in which tax cuts, lower tax rates and/or increase spending were involved to stimulate aggregate demand. On contrary, when aggregate demands were too high – inflation, government should take contractionary fiscal policy in which tax increase or spending cuts was involved.[4] Keynesian econ