Abstract

One of the most important and lasting contributions of J. M. Keynes’s thought to the development of modem economic theory has been the central role he assigned to fiscal policy in stabilizing output. Within the Keynesian framework, the economic result of the fiscal sector, whether a deficit or a surplus, is the most important balancing factor in the economy. The magnitude of the deficit or surplus is the central piece in the determination of the levels of aggregate demand, income, prices, and, eventually, in an open economy, of the balance of payments.