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Keynesian Economic Theory & Redistribution of Wealth

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Redistributing wealth by high taxes and welfare may undermine productivity and restrain a person incentive to work.

Is distribution of wealth fair and healthy for society?
Are their ways to redistribute wealth that do not undermine productivity?
(Just need brief answers one to two paragraphs)

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First of all let us examine the meaning and implications of Keynesian economics. According to wisegeek.com (2010) in Keyne's theory, one person's spendings goes toward anthers earnings, and when that person spends her earnings she is, in effect, supporting another's earnings; this circle continues on and helps support a normal functioning economy. According to this site, for example, when the Great Depression of the 1930s hit, people's natural reaction was to hoard their money; under Keyne's theory this stopped the circular flow of money, keeping the economy at a standstill.

According to wisegeek.com (2010) since Keynesian economics advocates for the public sector to step in to assist the ...

Solution Summary

According to this article, Keynesian economics warns against the practice of too much saving, or underconsumption, and not enough consumption, or spending in the economy; it also supports considerable redistribution of wealth, when
needed; it states that there is a pragmatic reason for redistribution of wealth.

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A description of Keynesian policies and how they affected the New Deal. Also includes a discussion of the pros and cons of Keynesian economic theory and how modern economists can improve on his theories.

Keynesian economic policy is a diversion from the laissez-faire concept of a free market economy. A laissez-faire concept of the economy argues that the laws of supply and demand should regulate prices, interest rates, employment and other aspects of the economy. Keynesian economics argues that there are times when the federal government should step in and "jump start" or boost the economy in economically depressed times.

Keynesian policies do not advocate that the government take over the economy completely. They actually encourage a mixed economy where most industries and utilities are owned privately. Keynes advocated the discouragement of savings. A central part of his economic theory was the idea of the circular flow of money. He argued that when a person spent his money that became the earnings of another person who in turn spent his money providing an income for still another person. This circular flow of money was what propelled a normally functioning economy. He argued that the Great Depression caused people to naturally want to hang on to their money rather than spend it. He said that in order to keep the economic cycle going, the government should step in and provide jobs, tax breaks and an influx of cash in order to keep the economy alive. Many of these ideas became foundational in New Deal programs such as defense spending, government works projects, and tax breaks.

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