Keynesian economics
Any govt taxing and spending policy designed to stimulate the private sector
Keynesian economics is an economic theory which is based on the ideas of British economist John Maynard Keynes. It emphasizes the role of government in stabilizing the economy in times of recession.
Keynesian economics suggests that during a recession, individuals and businesses tend to reduce their spending, leading to a decrease in aggregate demand (total amount of goods and services demanded by the economy). This decrease in demand can result in a prolonged period of economic downturn, known as a recession.
Keynesian economics proposes that government intervention is necessary in order to stabilize the economy during such periods. It suggests that the government should increase its own spending or decrease taxes, which will increase aggregate demand in the economy and stimulate economic growth.
Furthermore, Keynesian economics also advocates for the use of fiscal policy through government spending and taxation, rather than relying only on monetary policy through interest rates, to control inflation and boost economic growth. The theory suggests that by increasing government spending in key areas such as infrastructure and education, employment will increase and consumers will have more money to spend, thereby increasing demand and boosting economic growth.
Overall, Keynesian economics is a theory which emphasizes the importance of government intervention during times of economic recession, through the use of fiscal policy. It seeks to stabilize the economy and promote economic growth by increasing aggregate demand.
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