Ok, He says prices can adjust so there's no need for government to fill a hole in aggregate demand because the price of the apples can go down to .50 cent. What he leaves out is the effect on aggregate demand of the 50% loss the apple seller takes.
Assume the person was selling apples to pay his rent. That means he now can't pay his rent in full. Then how about the person that was renting the place to the apple salesmen? Now he's short some money. So, a major shock to aggregate demand throws the entire economic circle off. So sure, it's not necessary for governments to make up lost aggregate demand , but if you want to avoid a long drawn out depression it's a good idea for them to.
The problem is when times are good governments need to spend less than they get in tax revenue. In good times the government is supposed to be Keynes' hoarder! The balanced budget multiplier ONLY WORKS IF YOU BALANCE YOUR BUDGET. Something we haven't done since Clinton was president.
People forget that when Keynes came up with his theories there was no social safety net. Governments had costs but not like now. And the money was backed by gold so governments were conservative in truest sense of the word! To put these theories into practice now and get the intended effects we need smaller governments. All these agencies and bureaus are weighing governments down. Capitalism is the best system we've come up with so far but we're flawed. It comes from us so it's flawed. Governments need to understand this and when times are good save for when times will be bad. It's a guarantee that times will be bad. And it wouldn't be nearly as much turmoil when it came time for government to fill the hole in aggregate demand if governments ran surpluses all the time..
Anyway, Dr. Hollenbeck is still a beast and I bet if he had more time he would probably address my dissagreement in a way I haven't thought of....