Keynesian Economics

The theory that government spending can stabilize demand in downturns.

Keynesian economics, from John Maynard Keynes, holds that aggregate demand drives output and that governments should boost spending or cut taxes during recessions to fill demand gaps. It justified stimulus responses to the Great Depression, 2008 crisis, and the pandemic.

Following Keynesian economics, the government ramped up spending to revive demand during the slump.