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Keynesian Economics

The economics of John Maynard Keynes. The belief that the state can directly stimulate demand in a stagnating economy. For instance, by borrowing money to fund public works projects like new roads, bridges, housing, schools and hospitals.

Keynesian economists do not believe that markets always clear; they argue that an economy can suffer from persistently high rates of unemployment due to a lack of effective demand in many markets and industries. The cycle of low aggregate demand (and perhaps falling prices) can be difficult to break especially when consumer and business confidence is low.

Keynesian economics is a macroeconomic theory that is based on the ideas of the economist John Maynard Keynes. It emphasises the role of aggregate demand in determining economic output and employment, and suggests that government intervention can be used to help stabilise the economy.

According to Keynesian theory, when aggregate demand is low, unemployment can rise and economic growth can slow down. In order to stimulate demand and promote economic growth, Keynesian economics recommends that governments use fiscal policy (changes in taxes and spending) to increase aggregate demand. This can be done through measures such as increasing government spending, lowering taxes, or increasing the money supply.

Keynesian economics was influential in shaping economic policy following World War II, and many governments adopted Keynesian-inspired policies in order to help stimulate demand and promote economic growth. However, the theory has also been the subject of criticism and debate, and there are alternative macroeconomic theories that place greater emphasis on the role of supply-side factors in determining economic outcomes.

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