In six pages this paper examines how national income can be increased through government spending in an exploration of John Maynard Keynes' theoretical concepts with 2 Keynesian Cross Diagrams included. Six sources are listed in the bibliography.
Name of Research Paper File: TS14_TEgovspn.rtf
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two schools of though as to the best way to support an economy and stimulate it into growth. If we look at demand side economic and the theories of
Keynes he is clear that he believes that government spending may be used to stimulate the economy and create multiple expansion in national income.
Demand side economics can be seen as one if the theories that is used by governments when wishing to manage or intervene in their economies to create stability.
The paradigms of demand side economics can be seen as originating with John Maynard Keynes, and theories such as trickle down and the multiplier effect are both aspects of Keynesian
economics. His theories oppose those of the classical school, which looks to supply side economics, and he believed his theories could be
used to create a stable economy and provide full employment. However, when we look at them, especially the trickle down effect as well as the multiplier effect, we need to
consider how they can also explain the way an economy may crash when in a period of apparent prosperity. To understand this we
need to look at some of the underlying principles to the multiplier and accelerator effect. Let us look at the tickle down effect briefly as this may be a basis
form which to consider the other models. The belief of this school is that if governments lower tax rates, especially for those individuals or organisations which pay heavy taxes, then
the amount of money in the economy will increase and this will be to the benefit of everyone as the increased investment will create new jobs and stimulate the economy