Which economic theory is often associated with government interventions to manage economic cycles?

Keynesian economics is the correct answer because it emphasizes the role of government intervention in stabilizing the economy. Developed by economist John Maynard Keynes during the Great Depression, this theory argues that during periods of economic downturns or recessions, the government should actively engage in fiscal policies such as increased public spending and tax adjustments to stimulate demand and foster economic growth. Keynes believed that the economy does not always self-correct and that active government involvement is necessary to manage economic cycles effectively, particularly in times of high unemployment and low consumer spending.

In contrast, classical economics focuses on the idea that free markets can self-regulate and return to equilibrium without significant government intervention. Behavioral economics integrates psychological insights into economic decision-making but does not specifically advocate for government management of economic cycles. Marxist economics, on the other hand, critiques capitalism and advocates for ways to redistribute wealth and resources, and while it acknowledges economic interventions, it operates from a different ideological framework compared to Keynesian thought.