Keynesian Economics and Deficit Spending with Jacob Clifford

The video introduces Keynesian economics, highlighting John Maynard Keynes' influence on modern economic thought. It explains his challenge to classical economics, focusing on government spending to stimulate the economy. The multiplier effect is detailed, showing how initial spending can lead to increased economic activity. Challenges of implementing fiscal policy, such as debt and the broken window fallacy, are discussed. The video concludes by examining the trade-offs of Keynesian policies, noting their impact during the Great Recession.

What did Keynes suggest as a way to stimulate the economy when consumer spending falls?

• Increasing exports

• Lowering interest rates

• Increasing government spending

• Reducing taxes

What is the multiplier effect in Keynesian economics?

• The influence of interest rates on investment

• The impact of government spending on overall economic activity

• The effect of tax cuts on consumer spending

• The role of exports in economic growth

How does the marginal propensity to consume affect the multiplier effect?

• It reverses the multiplier effect

• It decreases the multiplier effect

• It increases the multiplier effect

• It has no impact on the multiplier effect

What is the broken window fallacy?

• The idea that breaking windows stimulates economic activity

• The belief that government spending always leads to growth

• The concept that tax cuts are the best way to boost the economy

• The notion that high interest rates encourage investment

What is the term used to describe the situation where government borrowing leads to less money available for private investment?

• Liquidity trap

• Fiscal drag

• Crowding out

• Multiplier effect