Why do Keynesian economists believe that government has to intervene on the side of demand in a recession?
A.
It is congruent with Marxist economic theory.
B.
Any resulting deficits can be balanced with trade surpluses.***?
C.
Because in recessions, even zero percent interest cannot incentivize business.
D.
Because when the government spends directly on voters, it strengthens party loyalty.
(I'm sorry for so many questions, just really want to do well on this assignment and check to see if I'm on the right path in understanding things. I tremendously appreciate all the help I've already gotten)
C is correct
Could it be C? (Don't know too much about this question)
Never mind I think I found it in my lesson (it should be C)
Keynesian economists believe that government has to intervene on the side of demand in a recession because they argue that market economies are inherently unstable and can experience significant fluctuations in aggregate demand. During a recession, there is typically a decline in consumer spending and private investment, which results in a decrease in overall demand in the economy. Keynesian economists believe that this decline in demand can lead to a prolonged period of economic stagnation with high unemployment levels.
To address this, Keynesian economists advocate for government intervention in the form of increased government spending or tax cuts to stimulate aggregate demand. By increasing government spending, the government injects additional demand into the economy, which encourages businesses to increase production and hire more workers. This helps to reduce unemployment and revitalize economic growth.
Additionally, Keynesian economists argue that in a recession, monetary policy alone, such as reducing interest rates, may not be sufficient to stimulate demand. They contend that even if interest rates are lowered, individuals and businesses may still be reluctant to borrow and spend due to uncertainty and lack of confidence. Therefore, they advocate for government intervention through fiscal policy to directly increase spending and boost demand.
To answer the options provided:
A. Keynesian economics is not inherently congruent with Marxist economic theory. While they both critique aspects of classical economics, they have different perspectives and goals.
B. While trade surpluses can help mitigate deficits, this is not the primary reason why Keynesian economists advocate for government intervention during a recession. The primary focus is on stimulating demand within the domestic economy.
C. This option highlights the argument that even zero percent interest rates may not be sufficient to incentivize business investment during a recession, which is one of the reasons why Keynesian economists suggest government intervention to stimulate demand.
D. While government spending can certainly influence voters and party loyalty to some extent, it is not the primary reason behind Keynesian economists' belief in government intervention during a recession. The primary focus is on addressing the decline in demand and stimulating economic growth.
In summary, Keynesian economists believe that government intervention is necessary during a recession to boost demand and reverse downturns in the economy. This is done through increased government spending or tax cuts to stimulate aggregate demand and encourage business investment and hiring.