Classical school of economic

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The classical school of economic thinking is quite different from the Keynesian school. The adherents believe in different roles for government and have different ideas about what drives an economy and even what an economy is and how it functions. Explain the two approaches for the following scenarios (be sure to think of monetary policy, fiscal policy, effects on the components of GDP, and incentives people may face.)

The economy is in a recession.

The Federal Reserve Board has decided to lower interest rates below what many consider to be the proper or natural rate.

Some policy makers are advocating an inflationary policy to address unemployment.

Senator T has proposed a law exempting credit card purchases and interest on credit debt from taxes to stimulate consumption.

Reference no: EM132606557

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