What is Keynes's theory of aggregate demand?
My central idea, detailed in *The General Theory*, is that the overall level of economic activity, and thus employment, is determined by aggregate demand – the total spending in the economy. If aggregate demand falls short of what is needed to employ everyone, economies can stagnate in a state of underemployment. This is unlike classical theory, which assumed full employment was the natural outcome. I emphasized that investment decisions, influenced by expectations and the marginal efficiency of capital, are particularly volatile components of demand.
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