Which economist is associated with advocating government spending to help an economy during the Great Depression (New Deal)?

Which economist is associated with advocating government spending to help an economy during the Great Depression (New Deal)?

• A. Adam Smith
• B. Karl Marx
• C. John Maynard Keynes
• D. Milton Friedman

Answer: (C)

Key idea: active fiscal policy to boost demand during a deep economic slump. When private demand collapses, government spending can put people to work and raise incomes, which in turn spurs further spending in the economy. John Maynard Keynes argued that in downturns the government should step in with spending and, if needed, borrowing, because the resulting boost to aggregate demand has a multiplier effect on GDP and employment. The New Deal is often cited as an example of this approach in practice, with public works, relief programs, and reforms aimed at reviving demand and confidence. Other economists listed align with different views: Adam Smith favored limited government and free markets; Karl Marx critiqued capitalism and emphasized systemic change; Milton Friedman promoted monetarist ideas emphasizing price stability and smaller government.

Key idea: active fiscal policy to boost demand during a deep economic slump. When private demand collapses, government spending can put people to work and raise incomes, which in turn spurs further spending in the economy. John Maynard Keynes argued that in downturns the government should step in with spending and, if needed, borrowing, because the resulting boost to aggregate demand has a multiplier effect on GDP and employment. The New Deal is often cited as an example of this approach in practice, with public works, relief programs, and reforms aimed at reviving demand and confidence.

Other economists listed align with different views: Adam Smith favored limited government and free markets; Karl Marx critiqued capitalism and emphasized systemic change; Milton Friedman promoted monetarist ideas emphasizing price stability and smaller government.