Keynesianism

Keynesianism is an economic theory derived from the work of John Maynard Keynes, holding that governments should actively manage demand through spending and taxation rather than relying on markets to self-correct.

During recessions, Keynesian policy prescribes increased government spending to stimulate the economy: The New Deal reflected early Keynesian thinking.

The approach dominated Western economic policy from the 1940s through the 1970s, when stagflation prompted a shift toward monetarism and supply-side alternatives.