Question

John M Keynes was advocate of which of the following suggestions?

• A. Pending money recklessly during recessions is suicidal
• B. Exorbitant spending during recessions is likely to boost economy
• C. Aggressive deficit spending is likely to be fatal for economic meltdown
• D. Government stimulus to economy may not help because of red-tapism
• E. None of the above

Hint:

Keynes famously said, "In the long run, we are all dead," emphasizing the need for short-term intervention during recessions.

Answer 1

The Correct Option is B

To answer the question regarding John M Keynes's advocacy during economic recessions, we need to understand the economic philosophy proposed by Keynes, which is a fundamental component of Keynesian economics.

Keynesian Economics Overview: John Maynard Keynes was a British economist whose ideas have greatly influenced modern economic and political theory. Keynesian economics advocates for active government intervention in the marketplace and monetary policy to ensure economic stability and growth. According to Keynes, government spending should increase during economic downturns to compensate for the lack of private sector spending.

Explanation of the Options:

1. Pending money recklessly during recessions is suicidal: Keynes did not advocate for reckless spending but for targeted government intervention to boost demand during economic slowdowns.
2. Exorbitant spending during recessions is likely to boost economy: This option accurately reflects Keynes's belief that during recessions, the government should inject money into the economy to stimulate demand and counteract the adverse effects of reduced private sector spending. He believed that this could be achieved through various means such as public works, tax reductions, and direct cash infusions to increase aggregate demand.
3. Aggressive deficit spending is likely to be fatal for economic meltdown: Keynes actually supported deficit spending as a way to bridge the gap left by reduced private consumption, so this option does not align with his principles.
4. Government stimulus to economy may not help because of red-tapism: While bureaucratic inefficiency can be a concern, Keynes believed that well-planned government intervention can effectively boost economic activity.
5. None of the above: One of the given options is consistent with Keynes's economic principles, so this is not the correct choice.

Conclusion: The correct answer is "Exorbitant spending during recessions is likely to boost economy". This choice directly aligns with Keynes's central theory that increased government spending during times of economic downturn can help mitigate the effects of recession and stimulate economic recovery.