ECN 120 Macroeconomics written paper
Write 1500 words on the following:
Imagine you are a columnist or have been contracted to write an opinion piece, for a quality publication such as The Economist or The Financial Times or Fortune. You have been asked to express your view of policy reactions to the current world recession and aftermath of the financial crash. Where do you stand on the dispute between ‘austerity’ and ‘stimulus’?
Deal with the following issues
Indicate the relevance of the dispute between Keynes and (what he called) ‘orthodoxy’ to the current policy debate.
What is the relevance of the multiplier?
What problems may there be in applying a Keynesian stimulus to ease the strain of the recession.
What problems are there in seeking to deal with government debt by austerity in the midst of recession (what would Keynes have said about that?)
What signs are there that policies of either austerity or stimulus are working?