The fundamental tenet of Keynesian economics is that economic stabilization can be achieved through government intervention.
Keynesians contend that because prices are somewhat rigid, changes in any aspect of spending, whether government, investment, or consumer spending, affect output. For instance, output will rise if government expenditure rises while all other spending factors stay the same.
During the Great Recession of 2008, Keynesian economic theories were applied once more in the US. 2009 saw the signing of the American Recovery and Investment Act by President Barack Obama. Government spending went up by $787 billion as a result of this statute. With this money, employment were both preserved and created.
People keep cash on hand for three reasons, according to Keynes: (i) transactions motive, (ii) precautionary motive, and (iii) speculative motive. The need for cash for immediate transactions for both personal and commercial exchange is the driving force behind keeping cash on hand.
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