Question

1. Economic policy has been described by some commentators as hyper-Keynesianism. On the other hand, others have argued this term is misplaced because the goal of the policy is not to expand aggregate demand but to maintain income.

1. In one paragraph, explain why the term hyper-Keynesianism might be appropriate when describing most countries’ fiscal and monetary policies today. Try to be as specific as possible.

2. In one paragraph, explain how these policies serve as an income maintenance program.

3. Think about your own economic situation. Without providing personal details you do not wish to share, write a paragraph explaining how you think the present Covid-19 economic crisis is affecting your economic future. Do you think government policies are helping you or hurting you? Write no more than one paragraph.

Answer 1

1)Keynes advocated the use of fiscal policy expansionary monetary policy in order to revive the economy from depression.Most of the modern democracies became ardent followers of his ideas .How ever there was also criticisms from Milton Friedman Friedrich list etc which marred the popularity of Keynesian thoughts.How ever since the depression in 2008-09 his ideas again gained prominence. Governments of different countries spend and central banks expand money supply in order to increase aggregate demand by increasing consumption and investment with out thinking about fiscal deficit and public debt position. This is nothing but hyper keynesianism

2) When there is a recession,people will loss jobs, their income will fall and their standard of living will be affected.production and investment will also experience a decline.ln such a situation government and central banks will have to intervene.Government's tax cuts will leave people with more income in their hands. Social security measures will provide income to the weak and disadvantages sections of the society. On the other hand central bank via expansionary policy will make facilitate credit expansion. People will be able to borrow money at low interest rates and investment activities will increase which will in turn provide jobs and income to people.

3)present economic crisis will have a long lasting impact on the economy. In the future people will definitely try to consume less and save more which will affect aggregate demand and create a disruption in production. As a result, rise in employment opportunities will remain a distant dream.Government policies are doing harm than good rather than good. Just declaring a stimulus package is not enough.What we need is effecient and affordable health care and security of life .Government seems to act like there is a trade off between saving lives and saving the economy. What everyone needs to realize is the fact one way to prevent economic damage is to save as many lives as possible.Healthy population is an asset to any economy.