The General Theory of Employment Interest and Money

The General Theory challenged the prevailing economic theory of the time which held that the economy would naturally tend towards full employment. Keynes argued that the economy could be stuck in a state of underemployment and that government intervention was necessary to stimulate aggregate demand and create jobs. Keyness theory was based on the idea that the level of employment is determined by the level of aggregate demand which is the total amount of spending in the economy. He argued that aggregate demand could be increased by government spending tax cuts and other measures. The General Theory was published in the midst of the Great Depression and it helped to shape the economic policies that were used to end the Depression. The book is still influential today and it is used to justify government intervention in the economy to promote economic growth and stability.