AP MacroeconomicsEconomic Systems & Schools of Thought
Keynesian Economics
Keynesian economics holds that aggregate demand drives output in the short run and that government should use fiscal and monetary policy to fight recessions.
Developed by John Maynard Keynes, it argues that economies can get stuck below full employment, so active demand management (spending and tax policy) is needed. It underpins the use of stimulus during downturns and the AD-AS model's short run.
Interactive graph
AD/AS Model →
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Study module
Aggregate Demand & Supply →
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