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DedPeter
2 months ago
9

John is a Classical economist. He argues that in a downturn the government should step back and allow the economy to self-correc

t. Pedro is a Keynesian economist and argues that _____.
Social Studies
1 answer:
Juliette [1.5K]2 months ago
3 0

Pedro, who follows Keynesian economics, advocates for state intervention as fundamental for economic recovery during downturns.

Keynesians hold the view that GDP (Gross Domestic Product) is positively influenced by aggregate demand. Therefore, to enhance GDP growth post-downturn, the government should engage actively in the economy by increasing public spending. Such actions would facilitate job creation, enhance household disposable income, and as a consequence, elevate overall demand for goods and services.

An increased demand for goods and services would trigger a cycle wherein companies would need to hire more personnel to boost production to satisfy the heightened needs. The rise in employment leads to a greater pool of income which in turn supports an increase in private spending and investments, further augmenting GDP and fostering economic growth.

To clarify, the GDP formula encompassing a particular period is shown below

GDP = Private Consumption + Private investment + Public expenditure + Exports - Imports


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