- Created by: Elise D
- Created on: 16-05-15 12:01
Modern macroeconomics came into existence between the two World Wars.
Free-market economists generally believe that the economy is self regulating or self adjusting.
John Keynes disputed this view. Keynes belived that an unregulated market economy can settle into an under-full employment equilbrium and that large-scale unemployment is caused by deficient aggregate demand.
The Keynesian revolution in the 1930s led to the Keynesian era in the post Second World War years.
The Keynesian economics crisis in the 1970s led to the free market counter-revolution in the next decade.
Monetarism was an early feature of the renewed dominance of free maket economics.
The decline of monetarism was followed by the growth of supply side economics.
After 1992, monetary policy was used to manage aggregate demand, with fiscal policy subordinated to monetary policy and primarily used as a supply side policy.
Despite a short lived revival of demand side fiscal policy from 2008 to 2010 monetary policy remains central to UK maroeconomic policy.