Brief History of Macroeconomic Thought and Policy
Read this chapter to examine macroeconomic attitudes towards economic policies of the three main schools of economic thought: Classical, Keynesian, and Monetarist. Also, learn about modern day interpretations of the main ideas.
1. The Great Depression and Keynesian Economics
In Britain, which had been plunged into a depression of its own, John Maynard Keynes had begun to develop a new framework of macroeconomic analysis, one that suggested that what for Ricardo were "temporary effects" could persist for a long time, and at terrible cost. Keynes's 1936 book, The General Theory of Employment, Interest and Money, was to transform the way many economists thought about macroeconomic problems.