Question

1) We came out of the 2001 recession some time back (quite some times back). What kind of policies were adopted to help get us out of that recession? Do these sound like Keynesian policies or Classical ones? Why? How would the policies by the other school of thought look different? What about the policies adopted to get us out of the 2008 recession? What kind of policies were these?

Answer 1

In 2001 the government intervened by giving tax concessions, these were Keynesian policies as government intervened to propel the economy. Classical policies are when the economy is let free to bring it to equilibrium on its own accord without government intervention, this would have increased the duration for the output to increase and would have kept the economy under recession for a longer duration. Which is why government intervened to propel demand and the interest rates were cut.

In 2008, again Keynesian policies were undertaken in the early stages by initiating fiscal stimulus and expansionary monetary policy, afterwhich the government initiated unconventional measures such as quantitative easing and asset purchases in order to propel the economy as just traditional measures such as lowering interest rates and increasing government expenditure with the existing stock of measures was not working as the government also needed surplus cash, thus quantitative easing took place wherein new money was printed and purchases were done in order to revive the economy.