Which theory emphasizes the role of consumer spending and investment in driving demand within an economy?

The correct answer highlights the central tenet of Keynesian economics, which posits that aggregate demand—comprising consumer spending and investment—is the primary driving force of economic activity. According to this theory, when consumers spend money, it stimulates economic growth, leading to increased production and job creation. This approach emphasizes the need for government intervention to regulate demand during economic downturns, often through fiscal policies such as increased government spending or tax cuts.

In contrast, supply-side economics primarily focuses on boosting economic growth by increasing the supply of goods and services. Monetarism emphasizes the role of government in controlling the amount of money in circulation, rather than consumer spending as the central economic driver. Behavioral economics investigates how psychological factors influence economic decision-making, but it does not fundamentally emphasize consumer spending as the main driver of demand in the same way that Keynesian economics does.