Political Economy Keynesian Economics Questions
Keynesian Economics views government deficits as a necessary tool to stimulate economic growth and stabilize the economy during times of recession or depression. According to Keynesian theory, during periods of economic downturn, the government should increase its spending and decrease taxes to boost aggregate demand and stimulate economic activity. This increase in government spending often leads to budget deficits, as the government spends more than it collects in revenue. Keynesians argue that these deficits are temporary and can be managed through fiscal policy measures. They believe that government deficits can help to increase employment, promote investment, and ultimately lead to economic recovery.