The causes of recession in the economy are highly diverse. Rightly in relation to this, Foley (2008) observed that interventions that can be used by governments in rejuvenating the economy in times of recession are also many. As far as fiscal policy and monetary policy are concerned, several concepts may be considered by the government as an intervention to deal with deficits. These include Says Law, Quantity theory of money, crowding out effect, Ricardian equivalence, and the price mechanism. To ensure the most effective balance between fiscal policy and monetary policy, a case will be made for the use of Say’s law for a deficit ridden government.

Say’s law which has also been known as the laws of markets states that aggregate production creates an equal quantity of aggregate demand (Wood & Kates, 2000). The first basis for which this concept will be recommended for the government is that it focuses on production and demand rather than spending and supply. Foley (2008) observed that when economies are running on deficit, increased spending and continuous supply of money can further worsen the woes of the economy. Meanwhile for a concept such as quantity theory of money, it would be noted that it emphasises on the money supply, which will not be a positive intervention for an ailing economy.

What is more, with Say’s law, the government will be put in a position to begin earning because its production will be required to increase. With the increase in aggregate production and an equal increase in aggregate demand, it is expected that the country will begin making revenues equivalent to the market value (Wood & Kates, 2000). Such revenue will then be used to run the economy and settle debts so as to ensure a minimal effect from the recession.