Economics is a study of human behaviour in relation to scars

resources and unlimited want.

Micro Economics : Study of individual behaviour.

Macro Economics : Study of economy as a whole.

 Major proponent of invisible hand, Laissez - faire policies.

Other economists built on Smiths work to solidify classical

economic theory.

Says law of market: An important element of classical economics.

Supply creates its own demand

Income Purchasing Power Demand.

 Great depression 1928.

Keynes - The theory of employment, interest and money , 1936.

Root cause of the problem - Lack of effective demand.

Solution - Pump Priming Theory.

Lack of Effective Demand

Production

Demand for FOP

Employment

Income

Purchasing Power
Government Investment

Employment
According to Keynes,
when economy suffers
Income
from depression,

Purchasing Power
Government
intervention is needed

Demand

Supply (Production)

Private Investment

FOP - Employment
 What about inflation ?

What about developed countries ?

References:

Keynes (1936), The theory of employment, interest and money, Palgrave

Macmillan Publications.