Question

How is full employment achieved by Keynes?

Answer 1

Keynes held the view that, in the short run, the economy tends to operate at an underemployment equilibrium, where unemployment persists. To eliminate this unemployment and achieve full employment, it is necessary to boost aggregate demand. Since consumption stays relatively stable in the short run, Keynes emphasized the need to increase investment. A rise in investment would lead to a corresponding increase in aggregate demand.