According to John Maynard Keynes, which idea of the classical economic theory did NOT work during the Great Depression?

Option 3 : The economy was always in full employment.

The Correct Answer is The economy was always in full employment.

According to John Maynard Keynes, the idea of the classical economic theory during the Great Depression,

• There was always an equilibrium level of employment and output.
• People spent their entire income on goods and services.
• The economy was not always in full employment.
• No competitive markets existed for factor inputs and outputs.

The General Theory of Employment, Interest, and Money(1936) is the seminal work of John Maynard Keynes.

• John Manard Kaynes is considered the father of macroeconomics.
• The General Theory of Employment, Interest, and Money published during the Great Depression of the 1930s suggested a new set of policy approaches to help economic recovery.
• John Maynard Keynes is the British Economist who worked especially in the area of Macroeconomics.
• After his contributions, the domain of economics is divided into microeconomics and macroeconomics.
  • Microeconomics-It studies the economics of the firm, individual, consumers, inflation, etc.
  • Macroeconomics-It studies the economics of a nation or a country.