Keynes

A government must implement a series of strategies and actions in order to lead the economy of a country. These actions receive the name of economic policies and are the tools which ministers use toachieve the governments objectives. Objectives may be in the short run or long run. The ones in short term deal with issues about unemployment, inflation, price levels, for example. Long run plans,in the other hand, structural changes such as developing strategic sectors in economy (e.g. telecommunications) or improving the distribution of income. Inside the economic policies there aredifferent types, fiscal policies, monetary policies, price policies, foreign trade policies, being the most important ones.
In economic development there are several phases which can be identified, whichaltogether form a cycle: recovery, peak, recession and trough, to enter again to recuperation and follow the process over and over again. The recuperation phase is said to be the one were economicexpansion takes place and the recession phase the one of economical contraction.

The point is that for one of these situations, there may be different theories in how to “fix” the problem and givesolutions. There are two perspectives to take account of: Keynesian and Neoclassical.
The Keynesian point of view explains that the role of the State is to intervene in the economy by applyingpolicies “against the economic cycle” (recession= policies for activating economy) in order to stabilize any disequilibrium. By doing this, economic cycles would be more stable and there would be nocrisis. It also promotes that from general profit the particular profit is achieved. This was reached by the use of fiscal policies, which either stimulated or restrained the aggregated demand through thecomponents of budget of the state (public expenditure and taxes (income)) and the relation between them. An example would be more expenditure of the government or decreasing taxes in recession to...