Question

Read the chapters The Keynesian Perspective and The Neoclassical Perspective. Answer all parts to Question #1 or Question #2 below.

Please be sure to state if you are answering Question #1( OR )Question #2.

1) What is the Keynesian prescription for inflation and for recession?

a. How did the Keynesian prescription address the economic failure of the Great Depression during the 1930's?

b. How did the Keynesian prescription address the economic failure of the Great Recession of 2008 - 2009?

2)  What is the Classical economics prescription for inflation and for recession?

a. How did the Classical economists criticize the Keynesian prescription to address the economic failure of the 1930's Great Depression?

b. How did the Neoclassical economists criticize the American Recovery and Reinvestment Act passed during Great Recession of 2008 - 2009?

Be sure to include specific market information and statistics to support your point of view.

Follow all of the guidelines stated in the Online Discussions section on pages 7 - 8 of the course syllabus. This includes referencing the textbook, your instructor's podcast and at least one other appropriate source. Be sure to cite your source(s), including the textbook, in the body of your discussion answer and include the source(s) at the end of the essay in MLA style format.

Answer 1

1) What is the Keynesian prescription for inflation and for recession?

Ans:- Before we discuss the Keynesian prescription for Inflation and recession we have to know what is the meaning of recession and inflation.

Recession is significant decline in economic activities across the country which affects the GDP, employment , Income , industrial output etc.

Inflation is rise the price of goods and services in the economy over a period of time.

Keynesian approach curbing recession and inflation in two important measure which are Expansionary fiscal policy and Contractionary fiscal policy.

Expansionary Fiscal policy which works for recession which means tax cuts and government spending stimulate aggregate demand and move the economy in general out of recession. In the keynesian diagram the Aggregate Demand( AD) curve shift to right which stimulate the investment and consumption

Contractionary fiscal policy works for Inflation control which increases taxes or decrease or cut the government spending to decrease aggregate demand and reduce the pressure of inflation in the economy. In the keynesian diagrams shows Aggregate Demand(AD) curve shift to the left and it reduce the Inflation .

a. How did the Keynesian prescription address the economic failure of the Great Depression during the 1930's?

Ans:- Keynesian's view point , terminology came to the sight after classical economics failed to solve the Great depression phenomena . At the time of Great depression Keynesian rejected the classical thinkers view point. Keynesian prescription for the great depression was counter cyclical fiscal policy where the government should undertake the deficit  spending which affects the investment declining and increase in consumer spending in order to stabilize the aggregate demand which was very important  part of the economy point of view. Keynes advocate the government to spend more money which increase the consumer spending capacity or demand for the economy which leads to increase the overall economic activity and it reduce the unemployment .

b. How did the Keynesian prescription address the economic failure of the Great Recession of 2008 - 2009?

Ans:In the recent Great depression 2008-2009 many of the states use the Keynesian approach which is fiscal stimulus . At the time of Barack Obama there was a campaign called economic stimulus package and congress also approved American Recovery and Reinvestment Act 2009 and the keynesian approach of economic stimulus package ended the great depression .