monetary and fiscal policy

Now that we have finished the material on monetary and fiscal policy in Hubbard, it is a good time to review and reflect. Please watch the two videos below and answer the questions that follow. These videos have received wide-spread acclaim among the economics profession. I’ve watched each dozens of times and still enjoy both. They are very well-scripted and provide a great comparison of two schools of thought in Macroeconomics: Keynesian and Austrian (Hayek). They seek to explain the sources of instability in the macroeconomy and highlight alternative approaches for dealing with economic instability. I recommend watching the videos through from start to finish at least once to get an idea of the content. Invite your friends and family to watch them with you. Then, read the questions and watch the videos again (and again and again). Pause the video as necessary to take notes. Think about what the actors are saying and how it fits into what you learned this semester in Macroeconomics. • Answers must be organized and supported by the content in BOTH videos and your textbook. • Don’t just quote the video. Explain and interpret in your own words. Quoting without interpreting and explaining will not earn full credit. • Do not search the internet for answers. Do not quote or cite other sources. I want your thoughts and your words. • Do not submit your first draft. Revise and rewrite your answers. Weak answers and grammatical errors will be severely penalized. • Total length should be 4 full typed pages. At this point in the course, you should have no trouble meeting this requirement. (3 full pages plus 1 line ≠ 4 pages. Do not stretch the margins or include a ½ page heading.) “Fear the Boom and Bust” a Hayek vs. Keynes Rap Anthem Fight of the Century: Keynes vs. Hayek Round Two Questions to think about in your essay 1. How do Keynes and Hayek differ in their view on the stability of the economy and the reasons for business cycles? Explain. 2. How do Keynes and Hayek differ in their approaches for dealing with a recession? Explain. Compare their views on how fiscal and monetary policy affect the economy. (Recall the discussions in the textbook about multipliers and the automatic mechanism.) 3. In the first video, the refrain asks if we should steer markets or set them free. In the second video, the referee repeats the refrain “which way should we choose, more bottom up or more top down?” Discuss and explain the significance of these questions. 4. Based on the material in the videos, in your opinion, which school of thought does your textbook (and the mainstream view in economics) tend to support? Explain. • Please answer in essay form. Your grade will be severely penalized if you just answer the 4 questions and do not incorporate your answers into a well-written, well-organized, thoughtful essay that reflects what you learned in this course throughout the semester.