1) If the economy is in a recession and the president invites three economists—A Keynesian, a...

1) If the economy is in a recession and the president invites three economists—A Keynesian, a monetarist, and a new classical—to offer explanation and policy options, what would each say in two sentences or less?

-Keynesian:

-Monetarist:

-NeoClassical:

2) Between the crises of 1930s and 2008, what are (mention two for each):

a) the similarities?

b) the differences?

3) If you were an influential economist, to prevent deep recessions in the future, what policies/thoughts would you offer?

Solutions

Expert Solution

Answer1- Keynesian:During a recession Keynessian economist would suggest government intervention to stabilise the economy. Government should increase expenditure in order to boost aggregate demand in the economy. Government should formulate employment generating policies to create employment and thereby increase income, aggregate demand and ultimately production in the economy will increase.

Monetarist: Monetarist would oppose the role of fiscal policy but stress on the role of monetary policy to stabilise the economy during recession. According to them, as money supply increases, people demand more, production increases and more jobs are created.

NeoClassical- The neo-classicist believed that a recession will correct itself through the forces of demand and supply. They believed that prices and wage rates are flexible and will adjust either upward or downward to restore the economy during depression or recession to its potential level of GDP.

Rahul Sunny answered 6 months ago

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