Introduction
In general, markets do not adjust automatically to bring about equilibrium. Thus, historically, many economists, including John Keynes, recommended the need for government intervention. In his book, ‘ The General Theory of Employment, Interest and Money’, Maynard Keynes asserts that the government should intervene actively in order to manage the level of aggregate demand in an economy so as to bring about desired level of employment and output. His argument is attributed to the fact that wages are rigid and, thus, may not fall enough to clear the market and solve the unemployment problem. Broadly, the government can intervene in ...
