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How the Economic Problems Would Be Approached by Keynesian Economists?

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Submitted By julietan94
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How the economic problems would be approached by Keynesian economists?
For the inflation uncomfortably high in Indian economy, the government must create incentives for the population to spend money, such as tax rebates, lower interest rates, and reward systems. The government should step in to increase spending, either by increasing the money supply or by actually buying things itself. Keynesian economists believe that cutting of taxes is an important to increase demand for good. Tax essentially makes goods more expensive. Therefore cutting tax on goods and services means that they will become cheaper. Because people want goods for as low a price as they can get in order to be able to buy other goods they will demand more of a good if it costs less for them to buy it with their disposable income. Essentially, consumer confidence has increased as they are getting more for their money. Keynes believed that the best way to grow an economy was to instil confidence in the consumer, this would lead to more demand and more being produced.

The fiscal deficit is a situation in which the approved expenditures of a government entity are more than the amount of revenue that is generated by that same entity. In Keynesian economics, a situation of this type is not necessarily viewed as a bad thing. In fact, a fiscal deficit can be used to help stimulate the economy and help to lift a nation out of a period of recession. The government should set a goal to balanced budget where actual and projected expenditures are always kept in line with the amount of income received. The government take actions should be taken to avoid any type of deficit spending.

The economy started to slow, the Keynesian doctrines held, the slowdown would be nipped in the bud by increased deficit spending by the government backed up by interest rate cuts by the central bank. Therefore, the...

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