What is the Keynesian solution to a recession or depression?

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John Maynard Keynes was a firm believer in the government's role in stabilizing the economy and in minimizing unemployment. In contrast to many free-market theorists, who held to the belief that the market, operating independent of government intrusion, was the most reliable means of ensuring economic growth and stability, Keynes argued that only the central government was possessed of the means of addressing persistently high unemployment levels. Reductions in demand for goods that invariably accompanied economic downturns--in effect, nervous or financially-constrained consumers seriously reduced spending on goods and services, thereby placing downward pressure on manufacturing and on the service sector--created a vicious cycle that depressed wages and reduced employment levels as business cut staff due to the decreased demand for goods.

Keynes's name became synonymous with the notion of government involvement in the economy because of his arguments that the government had a...

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