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1. Explain the viewpoints of classical and Keynesian economists.

How did the economy that existed at the time of these theories influence them? Which theory justifies increased government spending? Classical economists, those before the 1930s had no formal model that was agreed upon (Colander, 2010). hese economists saw macroeconomics in se!eral different wa"s, one of which being that the amount of mone" in a countr" dictated the price of goods and ser!ices rather than suppl" and demand (Colander, 2010). #e"nesian economists !iew the econom" as ha!ing different le!els. $s stated in the te%t, &what is true for the parts is not necessaril" true for the aggregate' (Colander, p.2(9, 2010). his means that one cannot understand the entire econom" without understanding the small parts that ma)e it up. *!er"thing is connected and relies upon certain factors of one another. his is a strong theor" that made wa" for the current economic theories of toda". he +reat ,epression of the 1930s showed economists the error of their wa"s (Colander, 2010). he failure of the economic s"stem and the depression that ensued opened the e"es of economists to the point that all things are interrelated. -rice is not dictated b" the amount of mone" on hand but rather suppl" and demand. also smaller parts of the econom" aggregate to ma)e the entire econom" (Colander, 2010). /" ha!ing a stronger understanding of the microeconomies of the countr" one can better understand the macroeconom". -rior to #e"nesian economics economists felt that go!ernment should ha!e !er" strict control o!er spending and maintain a balanced budget at all costs (Colander, 2010). he #e"nesian economic model left room for the go!ernment to print more mone" and lea!e the gold standard (Colander, 2010). his ga!e us inflation as it is toda". he more mone" that is printed the less it is worth. Reference Colander, D. C. (2010). Macroeconomics (8th ed.). Boston, MA: McGraw- !ll"#rw!n. 2. Why do major economists today call into uestion Keynesian economics? !s there a solution to sta"ili#ing economic fluctuations in unemployment and inflation? What does it mean to you for government to $get out of the way$? Economists today see that the Keynesian economic model does not fully take into account future possibilities. Keynesian focuses on the current micro and macro conditions, but has little to no room for expected future wealth and income (Colander, 2010 . !hese economists de"eloped models that show future income and consumption rather than #ust the current, (Colander, 2010 . $ather than li"in% in the here and now they now ha"e a future outlook.

&tabili'in% fluctuations with unemployment and inflation is difficult. !he %o"ernment has the ability to do so but only if the people cooperate. Cooperation is the problem. (hen people panic or see opportunity they act. !hese actions ha"e a ne%ati"e impact by decreasin% spendin% and lowerin% prices to a point that the economy is unable to support it. !hinkin% that all people beha"e in a certain manner is simply wron%. )owe"er, %enerali'in% specific classes of people in an economic model may work better. !he psycholo%y behind beha"ior for specific societal classes may be a much better way to understand spendin% and sa"in%s beha"ior that can lend to a model that would benefit the economy more than any other. (hen referrin% to the %o"ernment %ettin% out of the way one means it should not make ob"ious policies in reference to inflation. (hen the %o"ernment attempts to raise inflation the public offsets this by spendin% less and sa"in%. !his in turn hinders the economy e"en more with an increase in inflation and another decrease in spendin%. 3. What is the difference between contractionary and expansionary fiscal policies? Which is more appropriate today? Explain your answer. How might contractionary and expansionary fiscal policies affect your organization? * contractionary fiscal policy decreases money supply while increasin% interest rates. !his is done when actual income is abo"e potential income. +t will decrease the deficit with increased taxes or decreased %o"ernment spendin% (Colander, 2010 . *n expansionary fiscal policy increases money supply while decreasin% interest rates. !his is done when actual income is below potential income. +t increases the deficit by decreasin% taxes or increasin% %o"ernment spendin% (Colander, 2010 . !he appropriate fiscal policy to address the recession we are currently in would be expansionary. ,y increasin% %o"ernment spendin% or reducin% taxes it will shift the price le"els to a more appropriate le"el. * contractionary fiscal policy has the potential to cause ne%ati"e conse-uences to my current or%ani'ation by increased taxes and possible loss of %o"ernment contracts from reduced %o"ernmental spendin%. Expansionary policies ha"e the possibility to help the or%ani'ation with less taxes and possible new %o"ernment contracts. $eference Colander, .. C. (2010 . Macroeconomics (/th ed. . ,oston, 0*1 0c2raw3)ill4+rwin.