The Keynesian model is an economic theory that explains how the economy works and how governments can intervene to stabilize it. According to this model, the equilibrium level of output in the economy may not necessarily be at full employment, it can be at less than full employment, at full employment or at overfull employment.
If the economy is experiencing less than full-employment, the Keynesian model recommends that the government should increase its spending or reduce taxes to stimulate demand and increase output. This is because when there is less than full employment, there is a deficiency of aggregate demand in the economy. By increasing government spending or reducing taxes, the government can increase aggregate demand and stimulate economic growth.
For example, if there is a recession in the economy and unemployment is high, the government can increase its spending on infrastructure projects such as building roads and bridges. This will create jobs and increase demand for goods and services in the economy.
I hope this helps. Let me know if you have any more questions.
