# Keynesian Economics

*Macro & Economy — Finicade finance glossary*

Keynesian economics holds that demand can fall short of supply for long periods because prices and wages are sticky, so government should act.

Keynesian economics holds that demand can fall short of supply for extended periods because prices and wages are sticky, so recessions are not self-correcting quickly enough and government should act. Its central image is the paradox of thrift: everyone saving more at once cuts the spending that is someone else's income. The modern New Keynesian version formalises the price stickiness and dominates central bank models today.

**Also known as:** Keynesianism, Keynes, New Keynesian

**Related terms:** [Aggregate Demand](https://finicade.com/glossary/aggregate-demand), [Fiscal Policy](https://finicade.com/glossary/fiscal-policy), [Fiscal Multiplier](https://finicade.com/glossary/fiscal-multiplier), [Paradox of Thrift](https://finicade.com/glossary/paradox-of-saving), [Monetarism](https://finicade.com/glossary/monetarism)

Source: https://finicade.com/glossary/keynesian-economics