Keyness theory of full employement

2. Institute of Business & Technology
KEYNES'S THEORY OF FULL
EMPLOYMENT
Presented By:
Hina Awan (BME-1906)
Dr. Prof. Muhammad Faseeh Khan

3. BACKGROUND
 British economist.
 Born on June 1883, in Cambridge England.
 His father was a professor at Cambridge, and his
mother one of the first women to attend
Cambridge.
 Wrote “the general theory of employment,
interest and money.

4. Meaning of Employment
• Employment is a situation in
which people are engaged in gainful
jobs.
• Unemployment is a situation
when people are not engaged in
gainful jobs.

5. Full Employment
Full Employment implies “absence of
involuntary unemployment”. Involuntary
unemployment is a situation where people
are willing to work at the prevailing wages
rate but fail to find work. Existence of
voluntary unemployment and frictional
unemployment is compatible with full
employment

7. According to Say’s Law
Every Supply
Create it’s own
Demand

8. According to Keynes's Law
1- Aggregate Demand = Aggregate Supply
2-Investment = Supply
Keynes Theory of Full Employment

10. Findings And Conclusion
Keynes assumed that in short run, supply condition
remains the same. As one can take supply side to be
given, Keynes focus on the demand side. In the short
run thus it is the level of aggregate demand that
determined the level of employment and output. Given
the supply side, the higher the aggregate demand, the
higher would be the equilibrium level of employment
and income, until the full employment is reached.

11. Criticism of keynes theory
From 1970 on word, the keynes theory of employment came
under the sharp criticism from the monetarists. The
monetarists believed that Keynes laid more emphasis on the
determinants of aggregate demand and to a greater extend
ignored the determinants of aggregate supply.
The General theory of Keynes is applicable to the developed
economics. The keynes concept are not very useful for purposes
in less developed countries.