In the meantime, you have a normal, functioning economy. Keynes's theory impelled a host of interventionist economic policies during the Great Depression and formed the essence of Roosevelt's New Deal which influenced Britain and other countries in dealing with their own related depressions. The Great Depression in all countries had compelled people to hoard their money causing the economy to stop at a standstill. Keynes's theory urged governments to step in and to encourage public spending, which the government did by both increasing the money supply and buy buying things itself. In this way, government spending is more effective than taxes since raise in taxes will only serve to dissuade people from buying. An attitude which leads to reduced consumerism, more businesses closing, less employment, firing of current workers, and reluctance to engage in discretionary spending.
2. Division of Government Functions
Take a look at the government functions listed in the United Nations Classification of Governmental Functions in Appendix 5-2 of the text p.286. Discuss which functions you think would best be handled at the central, state and local levels and why.
The United Nations classifications of functions of government (COFOG) divides the major service commitments accepted by governments as follows
-General Public Service (legislative, executive, fiscal management, public debt service etc.)
-Defense -- this would be best handled at the central level since it involves the nation as a whole.
-Public Order and safety (police services; fire protection; courts; prisons) -- this would be best handled at the state and local level since it involves each state
