ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -For example, Keynesian economists would advocate deficit spending on labor-intensive infrastructure projects to stimulate employment and stabilize wages during economic downturns. They would raise taxes to cool the economy and prevent inflation when there is abundant demand-side growth.

Detailed explanation-2: -11.2 Government Spending and Tax Multipliers The followers of Keynes believed that fiscal policy can be a powerful lever to move the economy because the effect of an increase in spending or a cut in taxes would be multiplied by stimulating additional demand for consumption goods by households.

Detailed explanation-3: -Economist John Maynard Keynes rejected the idea that the government needed a balanced budget. He argued that the appropriate fiscal policy to deal with budgets was dependent on economic conditions. He believed that fiscal policy needs to act in the short run because ‘In the long run, we are all dead.

Detailed explanation-4: -Keynesian economists think that income is the key determinant of consumption and spending. The Keynesian consumption function expresses consumption as a function of current income.