What does Keynesian economics advocate for?

Keynesian economics advocates for increased government expenditures and lower taxes, particularly during periods of economic downturns. This approach is based on the belief that active government intervention can help stimulate demand and pull an economy out of recession. When a government increases its spending, it directly creates jobs and increases income in the economy, which can lead to higher consumer spending. Lowering taxes provides consumers and businesses with more disposable income, encouraging further spending and investment. This combination is intended to mitigate the effects of unemployment and foster economic growth.

Additionally, Keynesian theory emphasizes the importance of managing aggregate demand as a way to influence overall economic activity. It suggests that in times of economic hardship, traditional market forces alone may not be sufficient to spur recovery, thereby necessitating government action to boost demand. This perspective was notably influential during the Great Depression and has shaped many modern fiscal policies in response to economic crises.