Explain the central tenants of Keynesian economics.

Question

a In Keynesian economics, the government should not influence the economy during times of good economic growth, but it should take action to stimulate the economy during recession by increasing spending and lowering taxes.

b Keynesian economics is the theory or practice of controlling the supply of money as the chief method of stabilizing the economy.

c Keynesian economics is the theory that inflation is the main driving force behind economic growth or recession. The Keynes effect looks at the relationship that inflation has with both real and nominal interest rates.

d In Keynesian economics, the emphasis is on the determination of the value of a product and the importance of its utility to the consumer. In general, Keynesian economics states that, when the government tries to get more involved in the economy, it makes it worse.

Answer 1

The correct answer is option a. In Keynesian economics, the government should take action to stimulate the economy during a recession by increasing spending and lowering taxes. This is based on the idea that during times of economic downturn, there is a lack of aggregate demand, and by increasing government spending and reducing taxes, consumers and businesses will have more money to spend, thus boosting demand and stimulating economic growth. Keynesian economics also emphasizes the role of government intervention in managing the economy and promoting full employment.