Microeconomics: Private and Public Choice (MindTap Course List)
15th Edition
ISBN: 9781285453569
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter ST4, Problem 1CQ
To determine
Explain the Keynesian concept.
Expert Solution & Answer
Explanation of Solution
According to Keynes, only the government intervention with increasing spending can stimulate the economy. When the government spends money, the investments will increase. An increase in the investments cause to increase the employment and thereby the output in an economy. On the final result, aggregate demand will increase. The government spending always has a multiplier effect on an economy. So, it does not matter how much the government spends. That’s why the Keynes says that ‘even a broken window helps the glass man have some wealth’.
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Microeconomics: Private and Public Choice (MindTap Course List)
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