<P> Contrary to some critical characterizations of it, Keynesianism does not consist solely of deficit spending . Keynesianism recommends counter-cyclical policies . An example of a counter-cyclical policy is raising taxes to cool the economy and to prevent inflation when there is abundant demand - side growth, and engaging in deficit spending on labour - intensive infrastructure projects to stimulate employment and stabilize wages during economic downturns . Classical economics, on the other hand, argues that one should cut taxes when there are budget surpluses, and cut spending--or, less likely, increase taxes--during economic downturns . </P> <P> Keynes's ideas influenced Franklin D. Roosevelt's view that insufficient buying - power caused the Depression . During his presidency, Roosevelt adopted some aspects of Keynesian economics, especially after 1937, when, in the depths of the Depression, the United States suffered from recession yet again following fiscal contraction . But to many the true success of Keynesian policy can be seen at the onset of World War II, which provided a kick to the world economy, removed uncertainty, and forced the rebuilding of destroyed capital . Keynesian ideas became almost official in social - democratic Europe after the war and in the U.S. in the 1960s . </P> <P> Keynes developed a theory which suggested that active government policy could be effective in managing the economy . Rather than seeing unbalanced government budgets as wrong, Keynes advocated what has been called countercyclical fiscal policies, that is, policies that acted against the tide of the business cycle: deficit spending when a nation's economy suffers from recession or when recovery is long - delayed and unemployment is persistently high--and the suppression of inflation in boom times by either increasing taxes or cutting back on government outlays . He argued that governments should solve problems in the short run rather than waiting for market forces to do it in the long run, because, "in the long run, we are all dead ." </P> <P> Keynesian economists believe that adding to profits and incomes during boom cycles through tax cuts, and removing income and profits from the economy through cuts in spending during downturns, tends to exacerbate the negative effects of the business cycle . This effect is especially pronounced when the government controls a large fraction of the economy, as increased tax revenue may aid investment in state enterprises in downturns, and decreased state revenue and investment harm those enterprises . </P>

According to keynesian economics what can the government do to prevent recessions
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