Keynes grew up in Cambridgeshire, England. Born into a moderately prosperous family, he attended Eton, one of the most prestigious private schools in England. His father was an economic scholar, and an academic administrator at the University of Cambridge. His mother was a city official, as well as being one of the first female graduates of the university of Cambridge, due in no small amount to her marital connections. John, though not much of an athlete, excelled in mathematics, won prizes for essays that he wrote, and was considered “a scholar of the classics”. He generally enjoyed his years at Eton however other notables in history who attended the school, such as Orwell and Connolly, have memories of Eton in a sharp contrast to those of Keynes in that they tend to be far

“When injections are less than withdrawals, output falls until a new equilibrium is reached. It is only at this equilibrium output that Say’s law is true, with injections and withdrawals the same” (3).

John Keynes was quite an active man over his years. He wrote on mathematics, formulated economic policy as an adviser to the British government, was director of the British central bank, served as a representative at international conferences, such as the Paris peace conference at the end of WWI, was a college administrator at Cambridge, was editor of a major economics journal, a theatre producer, an insurance company chair, an investment trust manager, and all this while making a small personal fortune through his own investments and ventures.

Employers and workers only adjust their behavior when the purchasing power of their wages change. An example of this is in an inflationary market, if prices rise, purchasing power will fall

Essentially Keynes concluded that involuntary unemployment and underspending had become chronic problems during the Depression, and that underspending is not necessarily self-correcting. During the depression, companies were forced to lower their prices due to a lower demand (significantly affected by a lack of disposable income in the hands of the general population – a deflationary economic situation). He also introduced the postulate that the real interest rate (which is greatly affected by national economic policy as well as the current economic state) and unemployment have an inverse relationship. As interest rates rise, unemployment drops. People become willing to work for lower wages because they can no longer afford to be voluntarily unemployed.

3- Mark Lovewell, “Understanding Macroeconomics” pg. 325

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