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The Pros and Cons of Keynesian Economics.

"Keynesian economic theory recommends government manipulation of aggregated demand by rising spending, lowering taxes, and incurring debt during recession and pursuing the opposite policies during inflations" (Dye, 2008).

Question:
Discuss the pros and cons associated with the Keynesian theory and how policy makers can improve upon the theory

Solution Preview

"Keynesian economic theory recommends government manipulation of aggregated demand by rising spending, lowering taxes, and incurring debt during recession and pursuing the opposite policies during inflations" (Dye, 2008).

Question:
Discuss the pros and cons associated with the Keynesian theory and how policy makers can improve upon the theory.

Pros:

In the short run Keynesian economic policy will add money into the economy producing a rise in employment, tax revenue and production. When individuals are short of income it may take en entity like the government to provide a large influx of cash into the national economy. This short term benefit can be seen in the recent stimulus bills passed by President Obama.
Another pro would be the lowering of taxes. When taxes are lowered people have more disposable income at hand. The theory is that they will spend this money thereby stimulating the economy.
Keynesian policies seek to provide stability. Because the government is such a large entity it can provide some stability and avoid huge market swings and lessen the probability of ...

Solution Summary

This is a discussion of the pros and cons of Keynesian economics and also how present day economists can improve on Keynes' theories. Over 700 words of original text and links to important websites are also included.

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