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Supplementary Notespt.3

Supplementary Notespt.3 - SupplementaryNotes...

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Supplementary Notes - ‘The Great Recession’ Pt 3 1
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1. Motivation. As we have seen, there are basically two major  schools in macroeconomics:    The Keynesians, and     The ’Classicals’. The Keynesians are for an active government in economic  policy. The Classicals  believe that the market is efficient , let it be. The Keynesians hold the Great Depression as example that  only an active government can save the economy, The Classicals regard the stagflation as an example, where  intervention causes harm.    2
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The Keynesians use relatively simple models in their  theory. The classicals deploy dynamic, stochastic general  equilibrium models. The Keynesians participate in policy making, like  Bernanke. The Classicals dominate academic research. In usual debates, the Keynesians, like Krugman,  complain that the approach of the Classicals as useless  and possibly harmful.
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