Reference no: EM1374338
Thinking like a Macro-Economist: John Maynard Keynes and Milton Friedman
Macro-economics is perhaps most divisive area of economics. Macro economists divide themselves into different schools of thought. Two of the biggest camps are the Keynesians and the Monetarists. Keynesians and post-Keynesians follow the theories of John Maynard Keynes, the most-celebrated economist of the 20th century who proposed an active role for government to stabilize the economy. Monetarists, on the other hand, follow Milton Friedman, the Nobel Prize winning economist who opposed government actions and emphasized the role of money in the economy, thus the name "monetarism".
For this assignment do some research on the ideas of Keynes and Friedman. Focus on the "big picture" of what their main ideas are and how they have influenced policy makers. Then write a 3 to 4-page paper addressing the following questions:
1. Compare and contrast the way Keynes and Friedman approach the economy. What are the key differences and similarities?
2. The following are five scenarios dealing with macro-economic policy. For each scenario determine if it represents fiscal policy or monetary policy, and explain your answer.
a. As President, George W. Bush and congress passed a tax decrease across all tax brackets.
b. When President Clinton was in office during the 1990's there was an intentional policy of reducing interest rates, both short and long-term, economy wide.
c. Beginning ng with the Bush administration and continuing with the Obama administration there was a bailout of the financial system.
d. The health care reforms that have been proposed.
e. The Federal Reserve System buys Treasury securities from banks in order to reduce bank holdings of securities and increase their cash balances. One reason to so this is to encourage banks to loan to businesses.
3. Based on your research and understanding of the background materials in this module, explain with which of the two economists do you agree more and explain why.
|
Finding long run equilibrium price
: If a representative company with long run total cost given through TC = 50 + 2q + 2q2 operates in a competitive industry where the market demand is given through QD = 1,500 - 40P,
|
|
Positive and negative externalities
: Externalities are 3rd-party consequence of some other action. They can be positive or negative externalities and they impose a benefit or cost to a 3rd-party.
|
|
Question about monopoly theory
: Since a monopoly is the only source of supply, customers are entirely at its mercy. There is no limit to the price the monopoly can charge.
|
|
Compute the firms profit or loss
: Suppose the following cost functions of a perfectly competitive company? Compute the firms profit or loss, should firm shut down if loss?
|
|
Compare and contrast keynes and friedman approach economy
: Macro-economics is perhaps most divisive area of economics. Macro economists divide themselves into different schools of thought. Two of the biggest camps are the Keynesians and the Monetarists.
|
|
Consequences of decriminalizing illegal drugs
: The consequences of decriminalizing illegal drugs have long been debated. Some claim that legalization will lower the price of these drugs and reduce related crime. Others claim that more people will use these drugs.
|
|
Theories of macroeconomics
: ABC Corporation is a small Canadian company that sells staples in Canada, which is a very competitive market. The staples can be classified as a standard commodity, with stores viewing staples as identical to those supplied through other companies.
|
|
Question related to aggregate demand curve
: Determine the effect of an raise in the quantity of money and find the difference between real variables and nominal variables? Are these variables affected through the quantity of money?
|
|
Perfectly competitive market
: Assume that, in a perfectly competitive market at profit maximizing quantity, the market price is greater than average total cost. Describe what will happen to the number of companies,
|