International Trade Term Paper Example | Topics and Well Written Essays - 750 words

International Trade - Term Paper Example Therefore increasing economic activity and reducing unemployment and deflation are the ultimate production. The Keynesian theory indicates the critical actions at some micro-level of public sector and at individual level that restrict the cumulative macroeconomic upshots. Ultimately, the expansion and potential of the existing economy becomes lower and lower. IS-LM model of John Hicks, and the Phillips curve are the two basic theories of Keynesian macroeconomics which policy makers could use to grasp the business cycle in the country, however, both models are rejected by Post-Keynesians. IS-LM is an abbreviation of Investment Saving / Liquidity preference Money supply. This model has the same dominance as the Keynes actual analysis in formatting the actual policies both public and government sectors. The model correlates cumulative employment and demand to three vital capacities, i.e., government budget, money circulation, and the business prospects. During the great recession period of early 1930s, when numerous Neo-classical economists like Lionel Robbins, Edwin Cannan, Gustav Cassel and Arthur C. Pigou were using the further wage cuts policy to trim down the unemployment, Keynesian Theory was a revolutionary idea. IS-LM model and Phillips curve were widely used. For the prediction purpose, the economist used the IS-LM model. For instance, increment in the money would result higher productivity and employment and consequently Phillips curve was applied to predict an increase in inflation. The most appealing factor in the recognition of Keynesian Theory was that it provided theoretical guidance to policy-makers during the Great Depression era of 1930s. A lot of people considered that Keynesian Revolution was the outcome of rationale approach of government macroeconomic policy. The logical approach of Neo-classical economists looked like counterintuitive because