John Maynard Keynes believed that governments should increase spending in order to ___.
Question
John Maynard Keynes believed that governments should increase spending in order to ___.
Solution
John Maynard Keynes, a prominent economist, argued that during times of economic downturns or recessions, governments should intervene by increasing public spending. The primary rationale behind this belief was to stimulate demand within the economy.
When private sector demand is low, such as during a recession, businesses may cut back on investment and production, leading to higher unemployment and lower consumer spending. By increasing government spending on infrastructure projects, public services, or direct financial support to individuals, Keynes believed that this could effectively increase overall demand.
As more money circulates in the economy, it encourages businesses to produce more, hire additional workers, and invest in expansion, which collectively helps in lifting the economy out of a downturn. This approach is often referred to as Keynesian economics, emphasizing the role of government in mitigating economic cycles.
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