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The General Theory of Employment, Interest and Money
John Maynard Keynes’ *The General Theory of Employment, Interest and Money* blows up the classical economic playbook that dominated 19th and early 20th-century thought. Rejecting the idea that markets automatically hit full employment, Keynes introduces involuntary unemployment—workers ready to take jobs at current wages who can’t find work. He argues aggregate demand, not supply, drives economic activity, with employment levels set by the sweet spot between total supply and demand prices. The book breaks down three core pillars shaping demand: consumption propensity (how much people spend vs. save), marginal efficiency of capital (expected returns on investments), and liquidity preference (the urge to hold cash over assets). Using the 1930s U.S. Great Depression as a stark example, Keynes shows how weak demand leads to prolonged recessions, pushing for government interventions like deficit spending and interest rate tweaks to stimulate demand and get people back to work. This revolutionary framework redefined modern macroeconomics, giving policymakers a practical playbook for tackling economic crises.
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