Questions what is the main features of the socialist economy?

130. Keynes' economic views

Key words: Fiscal Policy, multiplier effect, aggregate demand

In the Keynesian view, aggregate demand does not necessarily equal the productive capacity of the economy. Instead, it is influenced by a host of factors. According to Keynes, the productive capacity of the economy sometimes behaves erratically, affecting production, employment, and inflation.

In economics and political science, fiscal policy is the use of government revenue collection (taxes or tax cuts) and expenditure to influence a country's economy.

The mechanism that can give rise to a multiplier effect is that an initial incremental amount of spending can lead to increased income and hence increased consumption spending, increasing income further and hence further increasing consumption, etc., resulting in an overall increase in national income greater than the initial incremental amount of spending.