Description
Keynesian theory entails the demand side economics. The level of customers’ spending is determined by their demand relative to goods and services provided to their satisfaction (customers’ tests and preferences). The assumption is that a greater level of customer spending implies the existence of stable economy. In other words, when there would be variability in customers’ demand, the fluctuation could create economic instability. This could result in unhealthy economic activity that can reduce government revenue mainly collected through taxation. This in turn creates budget deficit typically in the public sector. Nonetheless, it may not be appropriate to view budget deficit as abnormal or unusual occurrence as such. It is because the government may ultimately prepare sound fiscal policy to overcome the problem. Nonetheless, we can pose the following question: Is it feasible to design and implement a fiscal policy that would overcome deficit spending effectively? Please remember, effectiveness is about achieving a desired goal. The question has been forwarded to all members of the course. What do you think?
