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1. "The modern classical approach does not assume full employment. In fact, it allows for the deviations of employment from its full-employment level." Discuss these statements. If you agree with them, what is the nature of such deviations? Compare their nature with the nature of deviations from full employment that can occur in the traditional classical and neoclassical approaches and in the 1970s monetarist doctrines.
2. What are the underlying themes of the Keynesian paradigm? Do they justify the study of just one model, one variety of models, or several different varieties of models? Why?
3. In order to explain the performance of the economy through the business cycle and the formulation of the appropriate monetary policy, would you rely on either the classical paradigm or the Keynesian one, or sometimes on one and sometimes on the other? Explain your answer with reference to the different phases of the business cycle.
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