Keynesian Monetary and Fiscal Policy

Keynesian Monetary and Fiscal Policy

Write not more than a four-page, doubled -spaced 12 sized Arial font report in which you detail the evolution and implementation of Keynesian Macroeconomic policies and your understanding from having read the final chapters on Fiscal and Monetary policies discussed in the textbook. Cite historical examples of effective Keynesian policies as they have been enacted -from the Great Depression and the Great 2007-09 Recession of the financial system.

Compare vs contrast why Keynesianism did not particularly work during the 70’s stagflation. Why do you think Keynesian policies proved not to be effective at the time and the economic reasoning behind this that vindicates Keynes.

Include at least 3 sources in your reaction paper outlined on a third ‘Works Cited” page-APA style.. Hint-think in terms of Keynesian spending to stimulate AD when the nation undergoes a short run fluctuation in GDP and employment due to the onset of a recession/depression or high inflation. Try to follow your reasoning logically in relation to what the fiscal policy tool-expansionary or contractionary aims at achieving in the macro economy in terms of FE levels of GDP and employment. You may use in—text citations or footnotes in your narrative. You might want to show graphically episodes of expansionary and contractionary fiscal or monetary policies to support your arguments via the Keynesian AD_AS Model

Requirements: 4 pages

Author: Greg Mankiw Textbook: Principles of Macroeconomics, 9th edition

 

Answer preview

The concept of Keynesian Economics was propounded by a British scholar called John Maynard Keynes during the great depression of the 1930s (Coddington, 2013). According to Keynes, the downturn in the country’s economic status was significantly proportional to the expenditure of its citizens. In a nation where the citizens tend to save more, economic depression is a common occurrence compared to a nation where the citizens tend to spend more (Mankiw, 2020). The theory avers that for every dollar that a citizen spends on the economy, the positive effect is trifold because it facilitates the ease of trading (Blinder, 2008). The economy will tend to produce more when trading becomes easy, and as a result, the GDP of the country increases, which also increases the real income of the citizens.

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