Question

The experience of the great recession showed that when the economy is in a recession, from a keynesian perspective, the government can increase its spending?

Answer 1

When the economy is in a recession, from a Keynesian perspective, the government can increase its spending with minimum risk of crowding out private investment.

Keynesian macroeconomics argues that the answer to a recession is expansionary financial coverage, which includes tax cuts to stimulate consumption and funding or direct increases in government spending that might shift the aggregate call for the curve to the right.

Keynesians believe that, because expenses are particularly rigid, fluctuations in any aspect of spending—consumption, investment, or government expenditures—motivate output to change. If government spending will increase, for instance, and all other spending components continue to be constant, then the output will boom.

Keynesian economics is primarily based on two most important ideas. First, a combination call is more likely than a mixture delivers to be the primary motive of a short-run monetary event like a recession. Second, wages and charges can be sticky, and so, in a monetary downturn, unemployment can result.

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