Secondly, we outline what has become known as the Keynesian theory of national income determination.

In order to set out the Keynesian theory more formally, we must first make a number of assumptions.

When both the goods and the labor market suffered from insufficient demand to clear, the economy behaved according to Keynesian theory.

Keynesian theory helps governments manage the short-term business cycle, he said.

Keynesian economic theory has played a central role in the economic philosophy of modern American liberals.

Keynesian theory originally omitted a theory of price levels and inflation.

According to Keynesian theory, any extra money people have at this interest rate will simply go into idle balances.

This, they argue, is more powerful than in traditional Keynesian theory, because stages 1 and 2 are much stronger.

The concept has similarities to the later Keynesian theory developed in the 1930s.

However, even according to Keynesian theory, managing economic policy to smooth out the cycle is a difficult task in a society with a complex economy.