What economic theory emphasizes government spending to manage economic fluctuations?

Keynesian economics is the correct answer because it focuses on the idea that government spending and fiscal policy are crucial tools in managing economic fluctuations, particularly during periods of recession or economic downturn. This theory, developed by John Maynard Keynes, advocates that when private sector demand is insufficient to stimulate the economy, government intervention through increased spending can help to boost aggregate demand. By doing so, it can lead to job creation, increased production, and ultimately help to pull the economy out of a slump.

In contrast, other economic theories have different focuses. Neoclassical economics primarily emphasizes the role of supply and demand in determining prices and allocating resources without significant government intervention. Austrian economics argues for a limited role of government, promoting free markets and individual choice instead of government spending as a means of managing the economy. Behavioral economics studies the effects of psychological factors on economic decision-making but does not specifically advocate for government spending as a tool to manage economic fluctuations.

Thus, Keynesian economics stands out as the framework that explicitly supports the idea of government spending as a key strategy to stabilize the economy during fluctuations.