Can you relate the Classical and/or Keynesian macroeconomic models to assumption

Question

Can you relate the Classical and/or Keynesian macroeconomic models to assumptions about economic behaviors and to economics policies being implemented in the U.S. economy today? Discuss this with your group members. Is there anything that you've learned studying these models that gives you a better understanding of why the Obama administration's economists requested Congress to approve the "stimulus package"? Is there anything that you've learned studying these models that gives you a better understanding of alternative proposals that have been set forth for economic growth (or criticisms of the current policies)? Note: Please do not just post an answer to each of the questions. These questions are to get you started in your discussion—to make you think. Use one or two of them to get yourself started in relating the models to current economic policies. You will no doubt have your own questions that you will want to ask your group members as well.

Explanation / Answer

Under the economic stimulus package Congress approved the $787 billion plan on February 2009. Its aim was to end quickly the 2008 recession by spurring consumer spending and saving between 900,000 to 2.3 million jobs. Most essentially, it instilled the confidence required to boost economic growth.Keynes theorized that during recessions, the public gets frightened and holds back on spending, resulting in more layoffs, which in turn causes less spending in a vicious circle of economic decline. The method to break the cycle, according to Keynes, is to pump government spending into the economy by building roads and bridges and similar public works.Keynes disapproved classical economic theory which stated that free markets produce full employment. Keynes debated that aggregate demand determines the level of economic activity. If demand falls short, it causes recession and high unemployment. Keynesian economics fell out of favor under President Reagan, but George Bush brought back Keynes in the 2000s, ramping up spending to pump up aggregate demand, and President Obama has tried to follow suit.

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