Which economic approach advocates massive public spending during recessions?

Which economic approach advocates massive public spending during recessions?

• A. Mercantilism
• B. Globalism
• C. Supply-side economics
• D. Keynesianism

Answer: (D)

When demand for goods and services shrinks in a recession, government spending can directly boost overall demand, pull resources back into use, and help keep people employed. The key idea is that public investment and transfer payments inject money into the economy, and due to the spending multiplier, this initial boost leads to further increased incomes and consumption, helping the economy recover more quickly. This active fiscal stance during downturns is the hallmark of Keynesianism. Other approaches don’t emphasize large-scale public spending in recessions. Mercantilism focuses on building national wealth through trade and protectionist policies. Globalism centers on international economic integration rather than domestic stimulus. Supply-side economics argues for boosting production through tax cuts and deregulation to stimulate growth, rather than relying primarily on government spending to lift demand.

When demand for goods and services shrinks in a recession, government spending can directly boost overall demand, pull resources back into use, and help keep people employed. The key idea is that public investment and transfer payments inject money into the economy, and due to the spending multiplier, this initial boost leads to further increased incomes and consumption, helping the economy recover more quickly. This active fiscal stance during downturns is the hallmark of Keynesianism.

Other approaches don’t emphasize large-scale public spending in recessions. Mercantilism focuses on building national wealth through trade and protectionist policies. Globalism centers on international economic integration rather than domestic stimulus. Supply-side economics argues for boosting production through tax cuts and deregulation to stimulate growth, rather than relying primarily on government spending to lift demand.