Keynesian Revolution (20th Century)
Economic Methodology and the Evolution of Economic Thought
AO2
Syllabus requirement
Explains Keynes’s challenge to classical macroeconomics, emphasising aggregate demand management and active fiscal policy.
Assessment objectives
AO2 Application and Analysis
Summary
The Keynesian Revolution, named after John Maynard Keynes, argues that government intervention is necessary to restore and stabilise economies during deep recessions by boosting aggregate demand. It emphasises fiscal policy — higher government spending and lower taxes — as the primary short-run tool to reduce unemployment and counteract under-consumption when market forces alone fail.