Keynesian economics is a school of thought pioneered by British economist John Maynard Keynes during the 1930s. During the Great Depression, Keynes said the government should participate more in the economy by spending and lowering taxes. The idea was that the government would be able to offset some of the economic collapse from the Great Depression. Keynes also said the opposite should occur when the economy is booming. The government should step back by reducing its spending, raising interest rates, and increasing taxes. Fiscal and monetary policy, involving the federal government and FED, are the primary tools advocated by Keynes to better manage boom/bust cycles of the economy.
