Explain which perspective, Keynesian or Austerity, is better policy for a government during a recession

Economics Dec 27, 2020

Explain which perspective, Keynesian or Austerity, is better policy for a government during a recession.

Expert Solution

During a recession, the demand for goods and services falls because of less money in hand with people. Thus, the Keynesian policy is better for a government during a recession. Keynesian economics argues that the government must increase its spending in order to boost the aggregate demand in the economy. The rise in the aggregate demand will help boost the country's gross domestic product, and there are better chances that the economy will come out of recession.

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