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Chapter 24: Q 17. (page 601)

What is Keynes’ law?

Short Answer

Expert verified

This is a law in the ecomomy.

Step by step solution

01

Step 1. Introduction

According to Keynes law, there should be active government policy to manage the aggregate demand of the economy and prevent the economy from depression. It also recommended that in order to run the economy efficiently and fight unemployment there must be an active monetary and fiscal policy.

02

Step 2. Definition

Keynes's theory is simply referred to as the demand side theory that’s focal point is the short-run changes in the economy. Keynes recommended a decline in taxes in increases in government expenditure to energize demand.

Keynes's law is exactly the opposite of say’s law which tells that demand creates its own supply.

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