According to Keynesian analysis, two of the reasons why economies have recessions and depressions is aggregate demand is more likely than aggregate supply to be the primary cause of a short-run economic event like a recession. Second, in a downturn in the economy, unemployment may occur as a result of sticky wages and prices.
Keynesian economics focuses on providing an explanation for why recessions and depressions happen as well as a suggested course of action for reducing their consequences. Two essential pillars serve as the foundation for the Keynesian theory of recession.
The aggregate demand, or AD, is not always high enough to give businesses a reason to recruit enough people to achieve full employment. Due to sticky wages and prices, which do not change in response to changes in demand, the macroeconomy may adjust to changes in aggregate demand relatively slowly.
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