Student Name Course Institute Name Date Theories of Macroeconomic Development and Strategy 1. In the Keynesian economics views, the government policies can reduce the business cycle's amplitude. In addition to it, Keynes criticizes the countercyclical fiscal policies which influence the business cycle (Jahan et al., 2014). When the economy faces a deficit, there is a need to stabilize the wages and handle the employment. To control the economic impact, taxes can be increased to avoid inflation while the demand-side growth. So, Keynes supported the policy rules' implication over the monetary and fiscal policy. In contrast, the monetarism economist supports the monetary and fiscal policy as they assumed the monetary policy as a tool of government that can affect the economy (Jahan & Papageorgiou, 2014). The recession faced by the government in 1867-1960 is considered as the result of poor monetary policy. From their point of view, the money supply growth rate can best be matched with it. 2. In the monetarism economist's view, Fed failed when the offset forces put downward pressure over the money supply (Jahan & Papageorgiou, 2014). For reducing the money's stock, the actions performed went inversely to the strategy that is required. They also signified that naturally, markets move towards the balanced center, but when the incorrect sets are applied, money supply forces the economy to behave erratically. In handling the Fed, classical economists highlighted it based on monetary policy, which is enough to disbalance the economy (Humphrey, 2014). The association between bank money and base also started to act in a reverse fractional system. Due to this, money demand will increase while supply will fall. 3. In comparing the multiple economist school of thought, it can be witnessed that they hold diverse views regarding the crisis and its causes. However, in certain cases, Keynesian economists are presenting valid arguments to control the financial system. While, in my opinion, the monetarism point of view over the US recession cause is obsolete as it is not 1 entirely dependent on poor monetary and fiscal policy. But all these theories describe the same trends of money supply and demand while the determinants of hampering the process are different. Therefore, by analyzing it, Keynesian economists' theory can facilitate the government to utilize the fiscal policy while facing recession. 2 References Jahan, S., Saber, A., & Papageorgiou, C. (2014). What Is Keynesian Economics?. Retrieved 3 October 2021, from https://www.imf.org/external/pubs/ft/fandd/2014/09/basics.htm Jahan, S., & Papageorgiou, C. (2014). What Is Monetarism?. Retrieved 3 October 2021, from https://www.imf.org/external/pubs/ft/fandd/2014/03/basics.htm Humphrey, T. (2014). Averting Financial Crises: Advice from Classical Economists. Retrieved 3 October 2021, from https://www.richmondfed.org/publications/research/econ_focus/2014/q4/federal_reserve 3
