Question

How did keynesian analysis change the views of economists and policy-makers with regard to th eappropriateness of a balanced budget?

Answer 1

Keynesian analysis proposed that government should use expansionary fiscal policy when the economy is operating at a level which is less than the full employment. Hence total spending should always be consistent with full employment level of output. In a way Keynesian analysis argued that the government should not stress on balancing the budget and even if it has to suffer a deficit, it should not be apprehensive about the same if the economy requires stimulus.