Explain the Keynesian theory of unemployment

The Keynesian theory states that unemployment caused by a lack of aggregate demand in the economy

Due to low demand for final products, firms reduce their output, income level fall, investment is discouraged and thus less labour and capital are employed.

According Keynes, this unemployment can be solved by increasing aggregate demand by

• Reducing taxes to raise disposable income
• Using expansionary policies
• Increasing government expenditure
• Subsidization of consumer