What does Keynesian theory of economics promote?

Keynesian theory of economics emphasizes the importance of both public and private roles in the economy, particularly during times of economic downturn. It advocates for active government intervention when necessary to manage demand and stabilize the economy. This approach suggests that during recessions, consumer spending tends to decline, which can lead to increased unemployment and reduced economic output. In response, Keynesian economics supports government measures such as increased public spending and fiscal policy adjustments to stimulate demand and encourage economic recovery.

The notion of a balanced interaction between public and private sectors is crucial. While private enterprises drive economic growth through innovation and productivity, public policy plays a significant role in ensuring that the economy functions smoothly, particularly in addressing market failures and fostering an environment conducive to economic stability and growth. In contrast, other options reflect concepts that either diminish the role of government or suggest a limited capability for intervention, which does not align with Keynesian principles.