Lectures on John Maynard Keynes’ General Theory of Employment, Interest and Money (3): Chapter 3, “The Principle of Effective Demand”

In Chapter 3 of the General Theory, Keynes sketches out what he calls the essence of the General Theory of Employment. He introduces the Keynesian expenditure-based model, his aggregate demand function and also his aggregate supply function, a concept which spawned much debate among Post-Keynesian economists but which was, for a long time, virtually ignored in mainstream macroeconomics. He sets out the Savings = Investment version of Say’s Law and outlines how an economy can settle into an equilibrium at less than full employment.