Economics, Econometrics and Finance
2 years ago

Keynesian theory reveals how interest rates impact real economy dynamics.

Palgrave Macmillan UK eBooks
The Demand for Money and the Rate of Interest
Stephen Rousseas

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Money has two main roles: as a way to pay for things and as a way to save. Keynes, a famous economist, showed that changes in how much money people want can affect the interest rates we pay. He thought that the amount of money in the economy is controlled by the central bank. This means that the central bank can change how much money is available based on what they want to happen in the economy.