The Role of Fiscal Policy

timer Asked: Oct 26th, 2014

Question description

1.  What factors contribute to aggregate demand? Give examples of why long run aggregate supply can change?

2. Fiscal policies are the actions of Congress on spending and taxing.  (Monetary policy is the action taken by the Federal Reserve to change the money supply.)Although the unemployment rate has been declining, the effects of the US recession on employment continue to linger.  Some economists though are concerned about inflation heating up. 1.pdf3.pdf2.pdf4.pdf

Take either the classical or Keynesian point of view on whether fiscal policy should provide more stimulus or should the Federal government spending continue to contract. (AS ALWAYS IN THIS CLASS, THIS POSITION NEED NOT BE YOUR ACTUAL OPINION.)  Support your point of view using principles of Classical or Keynesian economics, as described by Mayer in Chapter 16 of "Everything Economics".

3. Is Paul Krugman's views consistent with Classical or Keynesian economics?  What might critics, like the NEOK video, say of Krugman's policy prescription?

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