Hello, I would like help on this assignmentThank  you,Keynes & FriedmanExplain how Keynes theorized the government could improve macroeconomic outcomes, especially in a recession. Use a diagram in your explanation. Include the pros and cons of this theory.Explain how Friedman theorized macroeconomic outcomes could be improved. Use a diagram in your explanation. Include the pros and cons of this theory.Contrast Keynes and Friedman theories on how to improve economic outcomes.Recently in the WSJ, there was an article about the issues of high levels of debt explain how this relates to both Keynes and Friedman.

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Asked Nov 29, 2019
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Hello, I would like help on this assignment

Thank  you,

  1. Keynes & Friedman
    1. Explain how Keynes theorized the government could improve macroeconomic outcomes, especially in a recession. Use a diagram in your explanation. Include the pros and cons of this theory.
    2. Explain how Friedman theorized macroeconomic outcomes could be improved. Use a diagram in your explanation. Include the pros and cons of this theory.
    3. Contrast Keynes and Friedman theories on how to improve economic outcomes.
    4. Recently in the WSJ, there was an article about the issues of high levels of debt explain how this relates to both Keynes and Friedman.
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Expert Answer

Step 1

As per our Honor code, we can answer only first question.

Step 2

In case of recession, the output in the economy is below the full employment level in the economy which further causes unemployment, as due to decrease in output, producers will decrease the labor demand.

For overcoming this situation, Keynes gave two policies, expansionary monetary policy and expansionary fiscal policy.

Fiscal policy-

In this, the government would either reduce taxes or increase the public expenditure. It would shift the IS-curve rightwards as shown in the figure below:

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Interest rate LM Е, Е. Effect of expansionary fiscal policy IS' IS Y' Output

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Step 3

In the above diagram, the effect of expansionary fiscal policy is shown. Due to shift in IS to IS’, the aggregate output increases as government expenditure and taxes are the components of aggregate output. But this also increases the interest rate from I to I’. it will increase the cost of borrowings and will reduce investments in economy.

Pros of fiscal policy are-

1) Through such policy, government can increase spending in the welfare projects and regions and stimulate the economy.

2) Tax polic...

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Interest rate LM LM Effect of E expansionary monetary policy E' I IS 0 Y Y' Output

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