Fiscal Policy at work

Fiscal Policy at work - Fiscal Policy at work i) During...

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Fiscal Policy at work i) During Unemployment: Fiscal policy has been strongly recommended by Keynes and his followers under the conditions of depression . Though the fiscal policy can take both expansionary and contractionary forms, it is the expansionary fiscal policy and deficit financing that has dominated the post Second World War period. It intends to maintain a high and growing size of the effective demand. Keynesians are of the view that only such policies can cure unemployment, stabilize the economy and help in maintaining high levels of output and employment. The classical opponents of Keynes however uphold the price and wage-cut policy that leaves out public intervention in economic activities . Those who follow the classical view also fear that government expenditure and its attempts to increase effective demand may cause inflation. Keynesians counter argue that if a choice is to be made between inflation and unemployment then the former should be preferred. Inflation is a lesser evil than unemployment. The classicists further state that without any
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This note was uploaded on 11/17/2011 for the course EC ec 201 taught by Professor - during the Fall '10 term at Montgomery.

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Fiscal Policy at work - Fiscal Policy at work i) During...

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