Question

11.20 In what way does Keynesian theory – in order for it to be consistent with what is observed

in the real world – rely on labor hoarding?

Answer 1

Keynesian economics theory emphasises on sustainable growth rates and strictly counters to recession.there are some ways like expansionary fiscal policy , maintaining a balance between unemployment and inflation, crowding out is restricted in order to ensure consistent economy.Labour holding is one concept where organisations and firms retain the employees during the phase of recession, Keynes argued that we have a problem with demand not with supply so we need to continue the workforce to ensure the production levels high to meet the requirements once the recession ends hence Keynesian theory is in favour of labour hoarding in order to maintain consistency in the state economy.