Question

Which of the following policy recommendations are consistent with the Keynesian, Monetarist, and/or Supply-Side views of the macroeconomy and stabilization policy? EXPLAIN CAREFULLY!

A. Since the long-run growth rate of real GDP is currently 2% per year, the Fed should set a target growth rate of the money supply at 2% per year.

B. Decrease government spending in order to reduce inflationary pressure.

C. Increase the money supply in order to alleviate a recessionary gap (i.e. a situation where current real GDP is below potential real GDP).

D. Support a balanced budget amendment

E. Balance the federal budget over the course of the business cycle.

F. Practice functional finance each federal fiscal year.

Answer 1

A. Monetarist

It is a monetarist articulation as the cash gracefully should be controlled in order to control the expansion in the economy. A monetarist is an economist who holds the solid conviction that the cash gracefully, including physical money, stores and credit, is the essential calculate influencing request an economy. Thus, the economy's exhibition, its development or compression, can be directed by changes in the cash gracefully.

B

Contractionary Fiscal Policy

Contractionary fiscal policy is a type of fiscal policy that includes expanding charges, diminishing government uses or both so as to battle inflationary weights. Because of an expansion in charges, family units have less disposal salary to spend. Lower disposal salary diminishes utilization.

C Keynesian

This includes the administration looking to expand total interest through higher government spending as well as lower tax.Expansionary fiscal policy is typically financed by expanded government getting and offering bonds to the private area.

Keynes said expansionary fiscal policy ought to be utilized during a downturn when there is joblessness, surplus sparing and falling genuine yield. He contended this infusion of government spending could animate financial movement and recover the jobless assets into beneficial use. This empowers the economy to recoup more rapidly than a laissez-faire approach.

D Supply Side Economics

The fair spending revision is a proposition for a correction to the Constitution to restrain government going through to the measure of cash got in income. The government would need to control spending. One concern is national crises which probably won't be managed adequately if there was a prerequisite for a reasonable spending plan.

Gracefully side economists contended that cutting expenses, particularly those of high salary gatherings, would build government incomes, since lower charge rates would create more motivations for business and people to work and less purpose behind them to maintain a strategic distance from charges whether through non-profitable interests in charge covers or out and out assessment shirking. Cutting charges would bring about more employments, an increasingly beneficial economy, and greater government incomes. These economists accept that with the use of flexibly side financial aspects adjusted spending plan can be accomplished