Problem:
Macro-economics is perhaps the most divisive area of economics when applied to political decision making, and macro-economists divide themselves into different schools of thought. Two of the biggest camps are the Keynesians and the Monetarists. Keynesians and post-Keynesians follow the theories of John Maynard Keynes, the most-celebrated economist of the 20th century who proposed that government stabilize the economy with the use of fiscal policy. Monetarists, on the other hand, follow the teachings of Friedrich Hayek. For this assignment do some research on the ideas of Keynes and Hayek. Focus on the "big picture" of what their main ideas are and how they have influenced policy makers. Then write a 3 to 4-page paper addressing the following questions:
1. Compare and contrast what policies Keynes and Hayek advocated regarding how the federal government should manage the economy. (Note: There is no need to include biographical information about their lives)
2. Explain one real-world event that counters the theories of each of the following: Classical, New Classical, Keynesian, New Keynesian, and Monetarist.
3. Explain one real-world event that supports the theories of each of the following: Classical, New Classical, Keynesian, New Keynesian, and Monetarist.
4. You have learned that Keynes and Friedman sharply differed on some basic ideas of how the Federal government should conduct economic policy. Which of the two economists do you agree with more, and explain why.