when lower interest rates fail to deliver results keynesian economists argue that other strategies must be employed primarily fiscal policy other interventionist policies include direct control of the labor supply changing tax rates to increase or decrease the money supply indirectly changing monetary policy or placing controls on the supply of goods and services until employment and demand are restored 2
keynesian theorists argue that economies do not stabilize themselves very quickly and require active intervention that boosts short term demand in the economy 8keynesian economics and the 2007 08 financial crisisin response to the great recession and financial crisis of 2007 2008 congress and the executive branch undertook several measures that drew from keynesian economic theory the federal government bailed out debt ridden companies in several industries including banks insurers and automakers it also took into conservatorship fannie mae and freddie mac the two major market makers and guarantors of mortgages and home loans in 2009 president obama signed the american recovery and reinvestment act an 831 billion government stimulus package designed to save existing jobs and create new ones it included tax cuts credits and unemployment benefits for families it also earmarked expenditures for healthcare infrastructure and education these stimulus measures and federal interventions helped america s economy recover preventing the great recession from becoming another full blown depression who was john maynard keynes john maynard keynes 1883 1946 was a british economist best known as the founder of keynesian economics and the father of modern macroeconomics keynes studied at one of the most elite schools in england the king s college at cambridge university earning an undergraduate degree in mathematics in 1905 3 he excelled at math but received almost no formal training in economics 