Keynesian economics emphasizes government intervention during recessions from "summary" of The Economics Book by DK
Keynesian economics suggests that during times of economic recession, government intervention is necessary to stimulate the economy. The theory is based on the ideas put forth by British economist John Maynard Keynes in the 1930s. Keynes argued that when the economy is in a downturn, individuals and businesses may not spend enough to support full employment. As a result, there is a gap between the amount of goods and services produced and the amount that consumers are willing and able to buy. In order to address this gap, Keynesian economics calls for the government to step in and increase its own spending. By doing so, the government can create demand for goods and services, which in turn encourages businesses to produce more and hire more workers. This injection of government spending helps to stimulate economic activity and reduce unemployment during times of recession. One of the key tools of Keynesian economics is fiscal policy, which involves changes in government spending and taxation. During a recession, the government can increase spending on public works projects, unemployment benefits, and other programs that put money directly into the hands of consumers. At the same time, the government can lower taxes to give individuals and businesses more disposable income to spend and invest. In addition to fiscal policy, Keynesian economics also emphasizes the role of monetary policy in stimulating the economy. Central banks can lower interest rates to encourage borrowing and spending, which helps to boost economic activity. By controlling the money supply and influencing interest rates, central banks can help to stabilize the economy and promote full employment.- Keynesian economics emphasizes the importance of government intervention in managing the ups and downs of the business cycle. By using fiscal and monetary policy tools, governments can help to mitigate the effects of recessions and promote long-term economic growth.
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