Answer to Question #268792 in Economics of Enterprise for NOMBU

Question

“Periods of economic instability” are in line with which of the following views of the business cycle?

Answer 1

The Keynesian view. This is because the Keynesian economic theory believes that the free market capitalism has an inherited instability. Keynesian economics focuses on using active government policy to manage aggregate demand in order to address or prevent economic recessions. As a result, the theory supports the expansionary fiscal policy. Keynesian also advocated for increased government expenditures and lower taxes to stimulate demand and pull the global economy out of the depression.