Keynesian and monetarist theories offer different thoughts on what drives economic growth and how to fight recessions. Classical theory is the basis for Monetarism, which only concentrates on managing the money supply, through monetary policy. There have been many arguments about the effectiveness of the monetary policy. Monetary and Fiscal Policies: The adherents of new Keynesian economics do not hold a unified view of economic policy because of … What are the policy tools of fiscal policy? The idea comes from the boom-and-bust economic cycles that can be expected from free-market economies and positions the government as a "counterweight" ... (QE) is a monetary policy … INTRODUCTION. Keynesian theory’s popularity waned then because it had no appropriate policy response for stagflation. Keynesian monetary policy focus on how changes in the money supply affect interest rates and investment spending. Keynesian economics suggests governments need to use fiscal policy, especially in a recession. Favour Rough or Coarse Tuning 6. Keynesian Economic Theory is an economic school of thought that broadly states that government intervention is needed to help economies emerge out of recession. (This is an argument to reject austerity … The Keynesian view of the monetary policy transmission mechanism operates as follows: First, the Fed uses its policy tools to … Keynesian economics failed to explain the emergency of high and sustained level of inflation and unemployment; this lead to the rebirth of the old notion that monetary … Monetarist economists doubted the ability of governments to regulate the business cycle with fiscal policy and argued that judicious use of monetary policy (essentially controlling the supply of money to affect interest … Keynesian economists argue that since the level of economic activity depends on aggregate demand, but that aggregate demand can’t be counted on to stay at potential real GDP, the economy is likely to be characterized by recessions and inflationary booms. Monetary View of Monetary Theory During and after World War II, inflation replaced depletion as a major economic problem facing many western industrial countries. (tell me what the people in charge will change to affect the economy) The two main tools of fiscal policy are changing taxes and spending, they can lower taxes to give people … 2.1. Prices and Incomes Policies 3. Government and Corporate Policies 4. Monetary policy can be said effective in an economy if a change in the money stock have impact on output level, employment, real wages and economic growth and so on. Re-establishment of Policy Effectiveness 5. Keynesian view of Long Run Aggregate Supply. Keynesian Fiscal and Monetary Policy 1. Who is in charge of fiscal policy? Existence of Involuntary Unemployment. Keynesian economists generally say that spending is the key to the economy, while monetarists say the amount of money in circulation is the greatest determining factor. Keynesian Policy for Fighting Unemployment and Inflation. Keynesian economists, believing that monetary policy is not adequate to pull the economy out of its current crisis, have argued especially for a dramatic increase in government spending as the surest way to revive … 1. Congress and the current Administration 2. In turn, aggregate demand shifts and affects prices, real GDP, and employment. While principally dwelling on the Keynesian macroeconomic system and the fiscal and monetary policies based on this system, we think we have some grounds about the significance of the subject.