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Keynes And Hayek Theories

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ECONOMIC THEORIES 1
John Maynard Keynes and Friedrich A. Hayek Theories
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ECONOMIC THEORIES 2
John Maynard Keynes theories emphasized on the role the government can or need to
play in administering fiscal policy so as to enhance sustainable economic growth. Keynes’
theories support government’s intervention in the economy. In his economic theories, Keynes
recommended that governments ought to take a central role in handling the economy. Keynes
also thought that through engaging in the bond market, equally as a trader and a purchaser,
governments have the ability to control interest rates. Through impacting interest rates,
governments can motivate or dishearten buyers from saving money. Where a nation’s economy
is declining, the government could purchase bonds, triggering a fall in the interest rates. Because
individuals would lack the capacity to generate more money on their savings, and since they
could borrow money less costly, there would be increased expenditure, and hence, economic
boom (Lekachman & Keynes, 1964).
Conversely, where the economy began growing dramatically, and the rate of inflation
becomes worrying, the government can trade bonds removing money out of the economy and
subsequently increasing the interest rates and therefore motivating public saving instead of
expenditure. Keynes' theories necessitated continuous monitoring and decisions by a centralized
bank. However, he asserted that such an enjoyment could eradicate or diminish the degree and
occurrence of economic busts (Lekachman & Keynes, 1964).
However, Hayek’s economic theories on government involvement were opposed to the
ideas of Keynes. He strongly advocated for free markets. According to Hayek’s theories, less
government involvement or intervention translated into more economic freedom for the public
whereas government intervention would result in loss of freedom in the free market. Hayek
strongly believed that where people have the liberties to choose, the economy operates more

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ECONOMIC THEORIES 1 John Maynard Keynes and Friedrich A. Hayek Theories Name Institution Instructor Course Date ECONOMIC THEORIES 2 John Maynard Keynes theories emphasized on the role the government can or need to play in administering fiscal policy so as to enhance sustainable economic growth. Keynes’ theories support government’s intervention in the economy. In his economic theories, Keynes recommended that governments ought to take a central role in handling the economy. Keynes also thought that through engaging in the bond market, equally as a trader and a purchaser, governments have the ability to control interest rates. Through impacting interest rates, governments can motivate or dishearten buyers from saving money. Where a nation’s economy is declining, the government could purchase bonds, triggering a fall in the interest rates. Because individuals would lack the capacity to generate more money on their savings, and since they could borrow money less costly, there would be increased expenditure, and hence, economic boom (Lekachman & Keynes, 1964). Conversely, where the economy began growing dramatically, and the rate of inflation becomes worrying, the gov ...
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