Macro-economics is perhaps the most divisive area of economics when
applied to political decision making, and 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 20thcentury who proposed that government
stabilize the economy with the use of fiscal policy. Monetarists, on the
other hand, follow the teachings of Friedrich Hayek. For this
assignment do some research on the ideas of Keynes and Hayek. Focus on
the “big picture” of what their main ideas are and how they have
influenced policy makers. Then write a 4 to 5 page paper addressing the
1. a. Discuss the policies that Keynes and Hayek advocated regarding
how the federal government should manage the economy. What are the major
differences between each school of thought.
b. Based on your answer to question #1a, which of the two economists would you agree with more? Explain.
2. Read Case in Point 3: Steering on a Difficult Course in section
17.3 of the online text
a. Why did people believe the difficulties Asian economies were
experiencing in 1997–1998 might bring a recessionary gap to the United
b. In dealing with the recession of 2008 why is it important for the F
ed and Congress to coordinate monetary and fiscal policy measures?
3. Compare the rationale of the Reagan administration for the 1981
tax reductions with the rationale behind the Kennedy–Johnson tax cut of
1964, the Bush tax cut of 2001, and the Bush tax cut of 2003.