Keynesian economists favor active policymaking

Reference no: EM13244100

Economists tend to fall into two distinct camps where government intervention in the economy is concerned.

"Keynesian" economists favor active policymaking based on the Phillips Curve and NAIRU theories. These theories purport a possible trade-off between unemployment and inflation and suggest that appropriate policy can be enacted to guide us back to a soft landing when business cycles create havoc within the economy.

Economists who align more with the "Classical" school would have a "leave it alone" (Laissez Faire) attitude and would oppose active policymaking. "Rational Expectations Theory" (a "new classical approach") suggests that people figure out what will happen based on past policy changes, therefore rendering active intervention ineffective.

Please respond to all of the following prompts:

In your opinion, which theory is better? Why?
If your objective was to affect the economy in the short run what actions would you recommend? Why?
Keynes is famous for saying: "In the long run we are all dead". How long is the long run? How long are you willing to wait for inflation to ease or for unemployment to improve?
Do you think economists will ever agree on the issue of active versus passive policymaking?

Reference no: EM13244100

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