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The concept that an initial change in spending (investment, government spending, etc.) will lead to a larger change in overall economic output. This occurs due to the continuous circulation of income.

A term popularized by Keynes to describe the emotional and psychological factors that drive consumer and investor confidence and, consequently, economic activity. These can include emotions like optimism or pessimism.

A situation where the economy is in equilibrium at a level of output that does not utilize all available resources, particularly labor, resulting in unemployment. Keynesian economics suggests this can occur due to insufficient aggregate demand.

The use of government spending and taxation to influence the economy. According to Keynesian economics, adjusting government spending and tax rates are the best ways to stimulate economic growth or curb inflation.

A policy intended to boost economic activity during a downturn by means of government spending and/or tax cuts. This term is closely associated with Keynesian economics' efforts to manage the business cycle.

A situation where increased saving by individuals leads to a reduced aggregate demand, which in turn lowers economic growth and total savings in the economy. Highlighted by Keynes as potentially problematic during recessions.

Occurs when a government's expenditures exceed its revenues, resulting in a budget deficit. Keynesians advocate for deficit spending during recessions to stimulate the economy.

The total demand for goods and services within an economy at a given overall price level and in a given time period. It represents the demand for the gross domestic product of a country.

A form of fiscal policy that involves increasing taxes or decreasing government spending to slow down an overheating economy and combat inflation.

A policy by monetary authorities to increase the money supply and reduce interest rates, with the intention of stimulating economic growth. Keynesians see it as a method to increase investment and spending in the economy during recessions.

An economic model that shows the relationship between the goods market (represented by the investment-savings or IS curve) and the money market (represented by the liquidity preference-money supply or LM curve). It's used to analyze the effects of fiscal and monetary policies.

A macroeconomic theory that emphasizes the role government can play in stabilizing the economy through fiscal and monetary policy. It suggests that active government intervention is necessary to manage aggregate demand and to address unemployment and inflation.

The proportion of additional income that a consumer spends on goods and services rather than saving. It is a fundamental component of the Keynesian multiplier.

A classical economic theory that states 'supply creates its own demand,' thus, all goods that are produced will eventually be consumed. Keynes challenged this idea, asserting that demand, not supply, is the driving force for economic growth.

The level of employment at which there is no cyclical or deficient-demand unemployment. In Keynesian economics, it may not always be achievable without intervention due to sticky wages and prices.

Coined by Keynes, it reflects the amount of goods and services that are bought at different price levels. It's crucial to his theory because it determines employment and production, not the dynamics of supply and demand.

The total amount of monetary assets available in an economy at a specific time. Keynesians believe that manipulating the money supply, through monetary policy, can influence interest rates and, therefore, investment and consumption.

A school of contemporary macroeconomics that strives to provide microeconomic foundations for Keynesian economics. It combines the Keynesian concern for inadequate demand and unemployment with modern economic analysis.

The concept that prices are resistant to change despite changes in supply and demand. Keynesian theory asserts that prices, like wages, may not adjust immediately to economic conditions, affecting the effectiveness of market forces to clear markets.

The demand for money, according to Keynes, which reflects the desire to hold cash or easily convertible assets rather than invest. It influences the interest rates and economic activity.

An economic concept that shows an inverse relationship between the rate of unemployment and the rate of inflation within an economy. Keynesian theorists initially believed this relationship to be a stable trade-off, though later revisions have challenged this.

Economic policies and programs designed to offset fluctuations in a nation's economic activity without intervention by the government or policymakers. Common examples include progressive taxation and welfare spending.

The proportion of additional income that a consumer saves rather than spending on consumption. The concept complements the Marginal Propensity to Consume and impacts the multiplier effect.

Expenditure by the government which is considered a key factor in influencing economic activity. According to Keynes, during a recession, increased government spending can help boost economic output.