Question

Relative to classical economic theory, John Maynard Keynes argued that government intervention in the economy is necessary to stabilize economic fluctuations. True or False?

Answer 1

True, John Maynard Keynes advocated for necessary government intervention in the economy to stabilize economic fluctuations according to Keynesian economics.

Step-by-step explanation:

True. Relative to classical economic theory, John Maynard Keynes argued that government intervention in the economy is necessary to stabilize economic fluctuations. Keynesian economics, developed during the 1930s, particularly in response to the Great Depression, suggests that governments should increase spending and offer tax breaks during economic downturns to boost employment and manage recessions. Conversely, during times of economic prosperity, it advocates for decreased government spending and higher taxes to control inflation. These policies imply strategic government intervention at a macroeconomic level, such as managing aggregate demand, without necessarily setting prices and quantities in microeconomic markets.