According to Keynesian economics, which sector can counteract a decline in business spending?

In Keynesian economics, the key idea is that aggregate demand drives economic activity and can influence the overall health of the economy. When business spending declines, it can lead to a decrease in overall economic activity, resulting in potential layoffs and reduced consumption.

The government sector plays a crucial role in this context. Through fiscal policy, the government can increase its spending to stimulate the economy, effectively counteracting the decline in business spending. This could involve increased public investment in infrastructure, education, and other essential services, which can create jobs and enhance overall demand in the economy.

On the other hand, while the consumer sector does play a vital role in encouraging economic growth by spending money, its ability to counteract declines in business spending is more limited, especially if consumers are feeling uncertain or pessimistic about the economy. In this way, the government is positioned as the most effective counterbalance through its ability to influence the economy directly, thereby reinforcing the concept that governmental intervention is critical during economic downturns.