How does Keynesian Economics view the role of the central bank?

Keynesian Economics views the role of the central bank as crucial in managing the overall economy. According to Keynesian theory, the central bank has the responsibility to control and regulate the money supply, interest rates, and credit availability in order to stabilize the economy and promote full employment.

Keynesian economists believe that the central bank should actively intervene in the economy during times of economic downturns or recessions. They argue that during such periods, the central bank should implement expansionary monetary policies, such as lowering interest rates and increasing the money supply, to stimulate aggregate demand and encourage investment and consumption.

Additionally, Keynesian Economics emphasizes the importance of the central bank in maintaining price stability. It suggests that the central bank should use monetary policy tools, such as adjusting interest rates, to control inflation and prevent excessive price increases.

Furthermore, Keynesian Economics recognizes the central bank's role in managing financial crises and maintaining financial stability. In times of financial instability, Keynesian economists advocate for the central bank to act as a lender of last resort, providing liquidity to financial institutions and preventing widespread bank failures.

Overall, Keynesian Economics views the central bank as a key player in managing the economy, responsible for maintaining stable prices, promoting full employment, and ensuring financial stability.