Question

Do free economies adapt themselves better to a situation of deficient demand? Why?

Answer 1

Free economies do not necessarily adapt better to a situation of deficient demand. Historically, like during the Great Depression of the 1930s, free economies failed to cope with deficient demand on their own. Government intervention through autonomous investment and expenditure was needed to break the cycle of low demand, low investment, low output, and low employment. This highlights the Keynesian view that free economies often require government action to correct deficient demand effectively.