Keynesian economists would suggest that, during a recession, the government should use stimulus efforts to help support the economy during that recession. Later, after the recession, Keynesian theory would suggest reducing government spending during a productive economy. Austerity measures, during a recession, operate on the opposite perspective from Keynesian theory in that Austerity promotes the reduction of government spending, and government deficits, in economic downturns. Read the following article and watch the following video. Explain which perspective, Keynesian or Austerity, is better policy for government during a recession.
Harvey, J.T. (2013, May 1). Austerity leads to…austerity! Forbes. Retrieved from http://www.forbes.com/sites/johntharvey/2013/05/01/austerity-leads-to-austerity/
Forbes. (2012, February 13). Risk on, austerity wins in Greece[Video file]. Retrieved from https://www.youtube.com/watch?v=SyE_J5Ei1dY
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