It has been the practical experience of every country of the world that economic progress has never run an even course. There have been wide fluctuations in the national income from time to time. The earlier economists were of the view that if at any time there was a period of prosperity, it is then generally followed by period of depression.
When an economy is in the grip of depression, it automatically recovers and soon grows into a boom. It was believed that economy normally operates at the level of the employment.
J.M. Keynes in his book, “General Theory of Employment, Interest and Money” has contradicted this view point of the earlier economists.
He is of the opinion that if an economy operates at a level of equilibrium, it is not necessary that there should be a high level of employment in a country. It is just possible that there may be millions of persons unemployed. So according to Keynes, if any country wishes to achieve high level of employment, it can only do so through the changes in the magnitude of investment.