Outcome: Keynesian Policy Prescriptions

What you’ll learn to do: understand the Keynesian view on changes in government spending and taxation

Here are some of the specific things you’ll learn to do in this section:

  • Describe the multiplier effect
  • Define the crowding out effect and explain why it occurs and how it reduces the fiscal multiplier.
  • Define the Keynesian concept of the Liquidity Trap and explain why it occurs and how it reduces the effectiveness of monetary policy.


The learning activities for this section include:

  • Reading: Keynesian View on Changes in Government Spending and Taxation
  • Reading: Liquidity Trap
  • Self Check: Liquidity Trap
  • Reading: The Expenditure Multiplier
  • Self Check: The Expenditure Multiplier
  • Reading: Crowding Out
  • Self Check: Crowding Out

Take time to review and reflect on each of these activities in order to improve your performance on the assessment for this section.