of aggregate demand, which would offset any increase in
employment. Keynes argued that unemployment could be
cured only by manipulating aggregate demand, whereby
increased demand (through government expenditure) would
increase the price level, reduce real wages, and thereby
stimulate employment.
Keynes’s views found acceptance after the publication of his
General Theory and had a profound effect on government
policy around the world, particularly in the 1940s, 1950s, and
1960s. As we know from this textbook, Keynes’s name is
associated with much of macroeconomics, from its basic
theory to the Keynesian short-run aggregate supply curve and
the Keynesian consumption function. His contributions to
economics go well beyond what can be mentioned in a few
paragraphs—in effect, he laid the foundations for modern
macroeconomics.
Edward Chamberlin (1899–1967)