143 Assignment: Keynesian and Neoclassical Economics (129/108) -- Macroeconomics

143 Assignment: Keynesian and Neoclassical Economics Take a look again at Figure 1 (originally from the page in the text titled “Neoclassical and Keynesian Perspectives in the AD-AS Model.”) Think about a minor recession, like the one that occurred in 1990. (Hint: a minor recession could be caused by a slight shift to the left in the AD curve.) What would a Keynesian likely recommend in response to a recession? What would a neoclassical likely recommend? Why would a Keynesian policy response not make much sense in response to a minor recession like the one that occurred in 1990? What would be the cost of letting the economy adjust by itself to a new long run equilibrium? Now think about a major recession, like the one that occurred in 1982. (Hint: a major recession could be caused by a large shift to the left in the AD curve.) Why would a Keynesian policy make more sense in response to a major recession like the one that occurred in 1982? What would be the cost of following a neoclassical policy then? Rubric | Criteria | Not Evident | Developing | Proficient | Distinguished | Weight | | Identify an appropriate Keynesian policy response to a recession | 4 | |||| | Identify an appropriate Neoclassical policy response to a recession | 4 | |||| | Explain the cost of doing nothing in response to a minor recession | 4 | |||| | Explain the cost of doing nothing in response to a major recession | 4 | |||| | Make a case for why a Neoclassical policy makes more sense in response to a minor recession while a Keynesian response makes more sense in response to a major recession | 4 | |||| | Total: 20 |