Final answer:
According to John Maynard Keynes, it is true that the federal government can influence the overall level of output and employment by using fiscal policies to affect aggregate demand, especially during economic downturns.
Step-by-step explanation:
It is true that according to John Maynard Keynes, the federal government could influence the overall level of output and employment in an economy. Keynes pointed out that government economic policies at all levels affect levels of employment, output, and price levels. He underlined the pivotal role of federal government, as it grew to become a major player in the economy.
Keynesian theory holds that government budget is a potent tool for influencing aggregate demand (AD). During economic downturns, such as deep recessions, the government can use fiscal measures like increasing government spending or adjusting tax rates to boost consumption and investment spending, thereby increasing aggregate demand. For example, during the 2020 recession, federal intervention was critical in supporting the economy.