In Keynesian economics, what role does government intervention play during economic crises?

In Keynesian economics, government intervention is viewed as a crucial mechanism for stimulating demand during economic crises. When an economy faces a downturn, such as high unemployment and decreased consumer spending, the government can step in to boost economic activity. This intervention can take various forms, including increased government spending on public projects, tax cuts to increase disposable income for consumers, and monetary policy adjustments to lower interest rates.

By increasing demand through these measures, the government can help revive economic growth and reduce unemployment. The idea is that when the government spends money, it creates jobs and encourages consumers to spend more, which in turn stimulates further economic activity. This cycle of increased demand leads to a more robust recovery from economic downturns.

In contrast to the other options, which suggest that government intervention is either harmful or ineffectual, the Keynesian perspective firmly advocates for proactive measures to address economic slack. This focus on demand-side policies is central to Keynesian thought, particularly in times of economic distress.