What does the Keynesian theoretical perspective imply What d

Solution

Keynesian theory is a short run economics and holds that economy fails to employ all the available resources and best technology for which government intervention is needed in the form of fiscal and monetray policies to move the economy to its natural or potential level. This is because wages and prices in the economy are sticky and do not change instantly to move the economy to its natural level. Prior to the great Depression of 1930s and publication of Keynes\' General Theory of employment, Interest and Money, classical view was important which held that wages and prices in the economy are flexible and no government intervention is needed. The role of government was highlighted by Keynes to move the economy out of Depression of 1930s.