Question

What are the fiscal policies that would be recommended to be put into effect if the Economy is experiencing a recession according to Keynes?

Answer 1

There two types of the fiscal policy are Expansionary and Contractionary fiscal policy used to correct the economy from the fluctuation.

Expansionary fiscal policy refers to the situation where during the recession in the economy government reduce the tax rate increases, the government expenditure, on protect and income generating activities, lowering the corporate and personal taxation are the major tools of the expansionary fiscal policy which results in increase int he aggregated demand in the economy.

This policy is advocated by the economist J.M.Keynes.