Keynes and his policies

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How does Keynes explain economic crises?
Through overproduction of goods and underconsumption by people. Also if savings are frozen and not invested - incomes decline.
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What does Keynes believe of the role of the state?
The state should be more involved - it is the only actor that can manage demand.
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What are his solutions to crisis? pt 1
Focus on restoring full employment, introduce conditions for effective demand; keep interest rates low ...
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What are his solutions to crisis? pt 2
Supplement individual market with public investment - increase public expenditure and size of the public sector. Also extend programme of relief.
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Issues with Keynes
1. His policies are inherently inflationary - organised labour can up wages - prices go up. 2. Issues of sovereign debt. 3. Weakens capitals right to manage due to increased socialisation of production + investment. 4. Keynesism in a country = defeat
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Keynes' response to his policies being enacted in a single county?
Limit the world market - have bilateral economic relations and regional cooperation or create an international agency to regulate the world market/
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Keynes' plans for the Bretton Woods agreement (that replaced the collapsed gold standard)
1. An International Clearing Union with with credit at the disposal for those with balance of payment (BoP) deficits. 2. These can be smoothed out by credit - normally BoP deficits would deflate the domestic economy decrease employment etc.
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Keynes' plans for the Bretton Woods agreement ot 2
3. Surplus running countries would be penalised and their surplus redistributed to countries running a deficit. 4. Creation of a new currency to increase credit within a system. 5. Transition phase to allow ease into new systems.
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What was Keynes' major pushing point in the Bretton Woods negotiations?
1. Capital controls - this gives the govt more control by preventing speculative flights of capital that can disrupt int. trade and policy autonomy. It allows the state to protect domestic capital market and control it.
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Keynes' theory of crisis in capitalism?
1. Prone to crisis in booms and slumps in the business cycle- due to decisions of consumption and investment in hands of private individuals. 2. If investment is low people will begin to save = slump. 3. Market needs to regulated by the state.
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Other cards in this set

Card 2

Front

What does Keynes believe of the role of the state?

Back

The state should be more involved - it is the only actor that can manage demand.

Card 3

Front

What are his solutions to crisis? pt 1

Back

Preview of the front of card 3

Card 4

Front

What are his solutions to crisis? pt 2

Back

Preview of the front of card 4

Card 5

Front

Issues with Keynes

Back

Preview of the front of card 5
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