He believes that as long as the money is flowing in the market that the economy will keep going. He doesn’t mind what activities or sector the money should flow as long as it is circulating in the economy. He advocates for government intervention of market through fiscal and monetary policies to steer the market. Keynes advises expansionary monetary policy a recession which is lowering down the interest rates. Low interest rates provide cheap credit to boost spending and investment. In case lowering the interest rates is not enough, he suggests that the deficit financing be restored. The reserve requirement of the banks is reduced, which increases the bank’s capacity to lend. Money multiplier effect also happens by lowering the reserve requirements. The multiplier effect depends on the requirements set by the reserves. In order to calculate the impact of the multiplier effect, you must first calculate the total deposit at the banks and multiply by the reserve
He believes that as long as the money is flowing in the market that the economy will keep going. He doesn’t mind what activities or sector the money should flow as long as it is circulating in the economy. He advocates for government intervention of market through fiscal and monetary policies to steer the market. Keynes advises expansionary monetary policy a recession which is lowering down the interest rates. Low interest rates provide cheap credit to boost spending and investment. In case lowering the interest rates is not enough, he suggests that the deficit financing be restored. The reserve requirement of the banks is reduced, which increases the bank’s capacity to lend. Money multiplier effect also happens by lowering the reserve requirements. The multiplier effect depends on the requirements set by the reserves. In order to calculate the impact of the multiplier effect, you must first calculate the total deposit at the banks and multiply by the reserve