Answer:
Step-by-step explanation:
According to John Maynard Keynes, a prominent economist of the 20th century, the main cause of the Great Depression was a lack of aggregate demand in the economy. Keynes argued that the depression was caused by a combination of factors, including a decline in consumer spending, investment, and international trade.
During the 1920s, the US economy experienced a period of rapid economic growth, fueled in part by increased consumer spending and investment. However, this growth was not sustainable, and by the end of the decade, the economy had become overheated. This led to a decline in consumer spending and investment, which in turn led to a decrease in demand for goods and services.
According to Keynes, this decline in demand led to a vicious cycle of economic contraction. As demand for goods and services fell, businesses were forced to lay off workers and reduce production, which further reduced demand. This cycle continued until the economy reached a state of equilibrium at a much lower level of output and employment.
Keynes argued that the solution to the depression was for the government to intervene in the economy and increase aggregate demand through fiscal and monetary policies. He believed that the government should increase its spending on public works projects and provide monetary stimulus to encourage investment and consumer spending. This approach, known as Keynesian economics, became influential in shaping economic policy in the post-World War II era.
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