Question

Answer what you can!

4. Economist Leland Yeager's essary, "The Keynesian Diversion" is making the case that is made throughout the course. That is Keynes was a detour away from a fundamentally sound (although not perfect) classical macro model. Explain what that means in the history of ideas. [At least 10 sentences]

5. in Hayek's essay "choice in currency: a way to stop inflation" he argues for a competitive monetary rule - for monetary and economic stability. Explain how Hayek reasons competition in money and will end inflation.

6. In the essay entitled "so close yet so different: the economics of the rio grande" economist D. Acemoglu and J. Robinson argue that there are some fundamental economic reasons for differences in the standard of living between Mexico and the United states (in the regions of the Rio grande).

What are those reasons that Mexico ends up impoverished and the UnitedStates wealthy?

Answer 1

Answer 4.

The Keynesian theory generally says that the government should increase demand to boost growth and also believes that consumer demand is a primary deriving force in an economy. Keynes advocated for increased government expenditure and lower taxes to stimulate demand and pull the economy out of the depression. The Keynesian model shows the aggregate supply curve is upward sloping because wages and prices are less flexible.

Whereas Classical economics emphasized on the use of fiscal policy to manage the aggregate demand because a classical theory is the basis of monetarism which focus on managing the money supply through monetary policy. The classical model also shows the aggregate supply curve is vertical because this model holds that the economy is at its full employment

The Keynesian model suggests that the government should use fiscal policy especially in recession but the drawback of overdoing this model increase inflation.

In Leland's 1973 article on macro-economics, Keynes is rather clearly worrying about a deep-seated deficiency of demand and not about the information deficiencies and discoordination.

Answer 5.

Hayek's essay-" Choice of currency: a way to stop inflation".

Hayek in his article writes about money and Keynes model and history, the manufacture of unemployment, weakness of political control of money and choice of money for payment in contracts.

According to me, he was right about doing a legal tender of money so to keep away from fraudsters and law should be made for coping the money and no abuse of money. So its become a government responsibility to protect their money from the competition by legalising it.

And also demonetisation of currency also a choice of currency, which results in the outflow of new notes in circulation in a country.

Electronic use of currency like Paytm, PayPal etc are also the choice of currency which is comfortable to use as transaction also a choice of currency.

so, the government should force it and apply to use such new notes and more emphasis on electronic mode to reduce the printing of currency notes.Which can lead to reduction of inflation