Keynesian

John Maynard Keynes believed the primary cause of the Great Depression of the 1930s was due to the disconnection of supply and demand. Keynes believed in the importance of "aggregate demand" for goods and that government policies could be used to fight high unemployment and deflation. President Roosevelt was impacted by Keynes ideas on modern economics and political theory for his "New Deal" campaign. In 1936 his work "The General Theory of Employment, Interest and Money" was published and the Keynesian tools continue to influence fiscal and monetary policies.

Keynesian believed that the "total income in a society is the sum of consumption and investment, unemployment and unused production capacity". Employment and total income can only improve by increasing spending for either consumption or investment. Keynes believed using government fiscal and monetary policies will balance if supply exceeds demand and as unemployment grows, the government will spend more than it receives in taxes. This causes a deficit spending and results in bringing up employment and balancing total demand.

In monetary policy, Keynesians believe that money supply should increase during economic downturns and decrease during economic booms. Wage and price controls are used against inflation. But Keynesians would rather fight unemployment and tolerate higher rates of inflation due to unemployment places hardship on economic resources. The rich during a depression would hoard money rather than invest on the economy while the poor had to spend their incomes on the necessities of life.

Keynes believed he could use his ideas for global economic policy to promote economic development and full employment in poor countries. In 1944 at the Bretton Woods conference, Keynes promoted to create an international currency called bancor, an international institution to fund Third World development, and an