NOTE
Keynesianism
English translation of the original VNote “Keynesianism”, preserving its structure with only necessary small corrections.
This is a historical learning note and may contain outdated or incomplete understanding.
Note: This preserves the original VNote structure and wording as much as possible. Only clear errors or changed definitions are corrected minimally.
5.1. What It Is
Keynes’s The General Theory.
5.2. Equilibrium in the Product Market
Market equilibrium can occur below full employment; policy may be used to support demand and employment. Definition: national income = consumption + saving. Equilibrium condition: investment = saving.
5.2.1. Consumption Function
Consumption rises with income; APC = consumption / income, MPC = change in consumption / change in income.
5.2.2. Investment Function
Investment depends on interest rates and the marginal efficiency of capital.
5.2.2.1. National Income
Two-, three-, and four-sector accounting relationships are used to connect expenditure and income.
5.2.2.2. Multiplier Theory
Multiplier = 1 / (1 - marginal propensity to consume).
5.2.2.3. Acceleration Theory
The accelerator links changes in income to changes in investment.
5.2.2.4. IS Curve
The IS curve describes product-market equilibrium combinations of income and interest rates.
5.3. Equilibrium in the Money Market
5.3.1. Demand for Money
Transaction, precautionary, and speculative motives.
5.3.2. Money Supply
The simplified model treats nominal money supply as policy-determined.
5.3.3. Money-Market Equilibrium
The LM curve describes money-market equilibrium.
5.4. General Equilibrium of Product and Money Markets
The IS-LM intersection is simultaneous equilibrium.