1. Classical v. Keynesian Approaches
Fiscal policies are the actions of Congress on spending and taxing. (Note that this is different from monetary policy, which is the action take by the Federal Reserve to change the money supply.)
The effects of the US recession are waning the jobless rate is falling. Some economists are recommending an end to any stimulus program, in which the government’s fiscal policy increases government spending and which increases demand and employment.
Explain and compare the Keynesian and classical points of view. Take either the classical or Keynesian position on a stimulus for our economy today (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.”
2. What Role for Government?
In Chapter 3, Wheelan describes a number of ways in which the “government is your friend” in a well-functioning society and economy. List and explain two ways that, in your everyday lives, there is a need for an effective government role in an economy.
Explain how this government role does, or does not, solve a market failure such as an externality.
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