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IPFS News Link • Economic Theory

Producers, Not Consumers, Are the Engine of Economic Growth

• Discern Report

Keynesian economists believe that recessions occur because of a weakening in aggregate demand, so boosting demand will end the downturn. Whenever an economy shows signs of weakness, most experts believe that increasing aggregate demand will prevent the economy from sliding into a recession. Since private spending is declining, Keynesians say the government should counterbalance this decline by increasing government spending on goods and services.

Demand is constrained by the ability to produce goods. The more goods that an individual can produce, the more goods he can acquire. The same can be said for the economy at large because what drives an economy is not demand but rather the production of goods and services.

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