ap macroeconomics

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1、FiscalandMonetaryPolicyWhydotheexpertsdisagreeineconomics?Thereareseveralpossiblereasons:·DifferentTimePeriod:Economistsmighthavedifferentopinionsontheeffectofnationalpolicy,andtheymayallbecorrectbecausesomearediscussingasix-monthtimeperiodandtheothersmaybediscussingatwo-yeartimeperiod

2、.·DifferentAssumptions:Inconsideringwhattheproblemisorhowasolutionwillwork,eacheconomistmighthavedifferentbasicassumptions.IfyoubelievethattheGDPwillgrowinthenextfiscalyear,andIdonot,wewouldhavecompletelydifferentideasaboutwhatnationalproblemswilloccurandhowtodealwiththem.·DifferentThe

3、ories:ThereareseveralschoolsofthoughtthateconomistshaveintheMacroeconomicworld.IfoneisaKeynesianandanotherisaClassicalist,theywillhaveverydifferentopinionsonwhatisrightorwrongwiththeeconomyandhowtodealwiththatsituation.·DifferentValues:Someeconomistsmaysharethesameassumptionsandtheorie

4、s,butsomebelievethatinflationisthemostimportantissuethatmustbedealtwith,whiletheothersbelievethatunemploymentisthemostimportantissuefacingtheeconomy.Thesedifferentvalueswouldleadtodifferentopinionsonwhatstepstotake.MonetarismSimilartoClassicaltheory,monetarismismostoftenassociatedwithM

5、iltonFriedman,whoarguedthatKeynesianpolicywasineffectivebecauseofcrowdingoutandcrowdingin.Monetaristsbelievethattheeconomyisstableinthelongrun.Therefore,theFedshouldfollowamonetaryruledesignedtoincreasethemoneysupplybythreetofivepercentperyeartospuramatchingincreaseinGDP.Bydoingthat,th

6、erewillnotbeenoughmoneyflowingthroughtheeconomytosustaininflation,or,inthecaseofarecession,theinjectionofmoneywillincreaseoutputcausingunemploymenttodecrease.SupplySideEconomicsRonaldReagansummedupsupplysideeconomicswithonefamousquote:"Governmentisnottheanswertoyourproblems;Governmenti

7、stheproblem."Whatthepresidentmeantbythisstatementisthatdecadesoftaxingandregulationhadreducedthenation'sabilitytoproduceatmaximumlevelsofefficiency.Economicallyspeaking,thegovernmenthad,bywayoftaxingandregulation,reducedtheaggregatesupplyofthenation—shiftingtheAScurvetotheleft.Theres