Keynes as the Father of Microeconomics - Essay Example

The main cause of any economic crisis according to Keynes is the aggregate demand being lower than it is supposed to be. When there is a low demand for goods and services in an economy, the sales of the products and services will most certainly fall off. Such low sales will intern make companies reduce the amount of total production, and if it is too severe, the firms will have no other option but to lay off workers. Laying off workers will result in an unemployment loop that is going to reduce the demands further.

From an economist’s point of view, the key indicators of goods and services are government purchases, net export, investment and consumption. As for consumption when the consumers are scared of spending, it is likely to spike an economic crisis. The main reason people are scared to spend is because of economic uncertainty. When it comes to investment, normally a reduction in consumption will also come with an increase in investment, however, with a decrease in the cost of mortgage people tend not to invest.