Reply to discussion | ECO 203 Principles of Macroeconomics | Ashford University

discussion 1:


There are essentially polar opposite view points to the classical and Keynesian approach to macroeconomics.  The largest, and most obvious, difference between these two conflicting points of view would be the ‘hands-on’ vs. ‘hands-off’ approach.  Classical economists follow the ‘hands-off’, or laissez fair approach (Amacher, 2019).  Keynesians would argue this is not a good idea because the economy clearly shows that, when left untouched, it can spiral in to terrible circumstances which call for a ‘hands-on’ approach.  Another primary dispute between the two view points is how the economy adjusts during recession and finds its way back to full employment (CrushCourse, 2015).  The classical point of view would lead us to believe the economy will correct itself over time.  The Keynesian model asserts the economy can be stuck below its potential for too long of time (g whizziest, 2015).  The Keynesians say wages and prices, although flexible, can get stuck and keep the economy well below its full employment potential (g whizziest, 2015).  Sure, it might correct itself in the long run, but how long? As John Maynard Keynes’ said, “In the long run we are all dead.

            For this discussion, I have been assigned to the classical point of view.  I would support this economics philosophy for the following reason: classical economists believe the economy will experience ups and downs but will always return to full employment on its own.  Even during a recession, the ‘price adjustment mechanism’ will right the economy (CrushCourse, 2015).  This would mean that during a recession unemployment, prices, wages, and interest would fall (CrushCourse, 2015).  However, this would also mean consumption, production, and investment should increase over time, which would eventually return the economy to full employment (CrushCourse, 2015).

            In regard to the current U.S. economy, as a classical economist, I would take several measures to right the course.  For starters, we would need to cut out all government involvement, or manipulation.  All the government does is mess things up.  Fire the Federal Reserve members.  The economy does not need any sort of regulation.  We will allow each market to regulate itself without rules imposed by the government.  In the long run, any problem the U.S. economy might face will be corrected naturally.

Amacher, R., & Pate, J. (2019). Principles of macroeconomics (2nd ed.). Retrieved from

CrushCourse. (2015, December 8). Classical and Keynesian economics. Links to an external site. [Video file]. Retrieved from

g whizziest. (2015, September 29). The Keynesian model and the classical model. Links to an external site. [Video file]. Retrieved from

discussion 2:


The model school that was picked for me to write about is classical economics.

Compare and contrast classical economics and Keynesian economics. What are the major differences between them?

Economics is the study of the distribution, production, and utilization of merchandise and enterprises. In economics, there are two different hypotheses, classical economics, and the Keynesian economic theory. The two of them differentiate one another and bring out two distinctive view/sides in economics The contrasts among classical and Keynesian economic influences government policies, in addition to other things. Classical economist shows that loan costs, wages, and costs of merchandise and ventures can change without outer mediation to “restore the economy to full employment” equilibrium (Dombusch, Fischer & Startz, 2001). It trusts the economy ought to be left and enable it to direct itself. On the off chance that the government can lessen its intercession since a portion of these optional financial and money related strategies can exacerbate the issue as opposed to managing it, the economy can reestablish itself. As the rate of unemployment keeps on expanding and the costs of products diminish, laborers will take lower compensation. Firms will make benefits, they will increase production to take advantage of low costs data sources, and supply will increment.

Nonetheless, Keynesian economists trust that expansionary strategies, for example, expanded spending and lowered taxes invigorate the total interest (Amacher, and Pate, 2012). The conviction here is that increased government spending utilizing upgrade programs or different strategies can be legitimately attached to building framework which expected laborers to do as such. With taxes, Keynesian theory trusts that lowering taxes will give additionally buying capacity to shoppers, and subsequently demand will increment.

Which model would you prefer? You may already prefer one because you are defending your school. Thoroughly explain your reasoning.

There are refinements to be drawn. There are unique thoughts in economics, giving tools to understanding why economies work as they do, and afterward, there are different economic policies that can be trailed by governments or recommended by economists. I think Classical is correct. The issue is there’s no time limit. They state that in the long run, the economy will work out; however that could take any number of years, so it’s a silly contention to make. With that in mind, even though I was assigned the classical economist, I’m nearer to Keynesian. The issue I have with Keynesian is that it appears to depend to a great extent on the responses of individuals. It asserts there’s a connection between the interest rate and savings. That is valid yet dislike transforming one generally has the direct relationship they guarantee it does. It mostly appears as though an over-rearranged portrayal of things that are effectively mishandled by policymakers.

As a classical economist or a Keynesian economist, what would you do for the current U.S. economy?

As a classical economist, I would demand the government to put their hand off the economy and let everything fall in place by itself.


Amacher, R., & Pate, J. (2019). Principles of Macroeconomics, 2nd edition. [Electronic Version]. Retrieved from:

Dombusch, R., Fischer, S. & Startz, R. (2001). Macroeconomics. New York: McGraw-Hill

discussion 3:


The government bodies that determine fiscal policy are the Legislative (Congress) and Executive (President) branches of government and the Federal Reserve.  Congress creates bills (plans, proposals, etc.) and they are then voted on.  Some of these bills are proposals in changes to government spending, or taxes.  Government spending and taxes define fiscal policy (Amacher, 2019).

The President can also propose changes to government spending, or taxes, in the form a bill to Congress.  I include the President as part of this response because the Executive branch clearly has the most weight, and will get immediate attention from Congress.  The Legislative branch may, or may not, sign these bills in to law. 

The last government body to determine fiscal policy is the Federal Reserve.  This entity is meant to have autonomy from the branches of government, although the Executive branch has the means to appoint members with approval from the Senate.  The Federal Reserve’s primary function is to conduct monetary policy (Federal Reserve, n/d).   

When defining fiscal policy as taxes and government expenditures, it is easy to see the effects such policies have on the economy.  Any changes to taxes, “can be a very effective tool for influencing the level of income and output,” (Amacher, 2019).  Several types of taxes from personal, business, and property will affect the economy in different ways.  When it comes to business, or corporate, taxes, the higher the they are, the less those businesses might produce or employ.  This is not to say that corporate taxes prevent production or employment, but they do have an effect.

Government spending is also a massive economic influence.  These expenditures add up to over a third of U.S. national income (Amacher, 2019).  There is a clear relation to government spending and employment.  Any new project or program will require people; therefore, new jobs.

The Federal Reserve, through its monetary policy, has the authority to raise or lower interest rates (Federal Reserve, n/d).  These interest rates directly impact the credit market which will determine the level of desire business will have towards borrowing funds.  The more expensive it is for a business to borrow funds the less they will produce or employ. 

Unfortunately, the U.S. national debt as had very little affect towards fiscal policy.  During the 80s through early 90s, the debt rose from less than $1 trillion to over $4 trillion (Amacher, 2019) and has continued to skyrocket.  This is because the national debt is a measure of all past budget deficits minus all past surpluses (Amacher, 2019).  The national budget is determined by Congress.  When the government spends more than the its revenues in a given year, we are left with a deficit (Amacher, 2019).  If our revenues exceed expenditures, we are left with a surplus.  The U.S. government has been successful towards a balanced budget for a couple years in 98’, 99’, 00’, and 01’ resulting in surplus (Amacher, 2019).  Since then, we have had nothing but deficit for each following year.  There simply has not been any serious effort made by fiscal policy to balance the budget and control a deficit. 

The current U.S. national debt is not a serious problem like heavy personal debt for the outstanding reason of accountability.  When it comes to personal debt, when left unpaid, there are consequences.  If you fail to make a mortgage payment or auto loan payment, there’s a good chance you can lose your house or car.  With the national debt, there are payments the U.S. government is obligated to make in the form of interest.  However, no one would be personally held responsible in the event the U.S. chose not to make such payments.  There would be consequences to the credibility of the U.S., but no government official would be left out on the street.

Amacher, R., & Pate, J. (2019). Principles of macroeconomics (2nd ed.). Retrieved from

Federal Reserve, (Date n/d). Board of Governors of the Federal Reserve System. About the Fed. Purposes and Functions. Links to an external site. Retrieved from (Links to an external site.)Links to an external site.

discussion 4:


Describe the roles of government bodies that determine fiscal policy.

The fiscal policy manages the government’s activities about tax collection and government use with the point of influencing one part of national income or the aggregate demand. The fiscal policy additionally goes for accomplishing at least one macroeconomic approach targets. It is utilized when the government wants to keep up a specific dimension of business, financial development, and regular prices. (Dombusch, Fischer and Startz, 2001). The government can utilize expansionary fiscal policy which includes expanding consumption and decreasing tax levels with a point of diminishing aggregate demand  (AD) or the GDP. This sort of fiscal policy manages monetary issues, for example, low financial development rate, deflation, B.O.P surplus, and unemployment rate. A recession prompts a recessionary gap which implies that the AD is shallow” then it would be in a” circumstance of full work. Government expenditure builds interest for items and services. If the government does not mediate amid the recession time frame, it might set aside much effort to recuperate from this recession. Moreover, if the reasons for recession are not recognized and tended to, it may happen once more.

Explain fiscal policies effects on the economy’s production and employment.

Fiscal policy choices widespread affect the regular decisions and conduct of individual family units and organizations. The objective of fiscal policy is to diminish unemployment.  A few financial analysts contend that taxes can significantly affect the force with which individuals work and their general proficiency and profitability. However, there is minimal substantive experimental proof to help this view. Numerous variables add to improving profitability, tax changes can assume a job, yet secluding the effect of tax reductions on efficiency is incredibly troublesome.

How does the enormous U.S. national debt affect the federal government’s fiscal policy?

There is a different way the fiscal policies would influence Federal debts. One, “certain policies that are now in place but are scheduled to change under current law would be continued, and some provisions of law that might be difficult to sustain for a long period would be modified” (Demirel, 2014, para. 5).  Also, “budget deficits would be smaller than those projected under current law (Demirel, 2014, para. 6). Lastly, “deficit reduction would be phased in such that deficits excluding interest payments would be a total of $4 trillion lower through 2024 than in CBO’s baseline, and the amount of deficit reduction as a percentage of GDP in 2024 (over 2½ percent) would be continued in later years” (Demirel, 2014, para. 7).”spending shortages would be littler than those anticipated under current law (Demirel, 2014, para. 6). In conclusion, “shortfall decrease would be staged in with the end goal that deficiencies barring interest installments would be an aggregate of $4 trillion lower through 2024 than in CBO’s pattern, and the measure of shortage decrease as a level of GDP in 2024 (over 2½ percent) would have proceeded in later years” (Demirel, 2014, para. 7).

Is the current U.S. national debt a serious problem like a heavy personal debt? Why or why not? Discuss thoroughly

Indeed, I do trust that the current US national debt is a noteworthy issue. Given that the national debt has as of late to become quicker than the extent of the American populace, it likewise influences our day by day lives. The national debt has exploded in the most recent decade to $21 trillion from about a large portion of that. What we owe is presently more prominent than the U.S. economy, a dimension that many, if not most, economist trust represents a risk to America’s way of life and its financial standing on the planet. What’s more, the debt is growing faster than our economy.



Amacher, R., & Pate, J. (2019). Principles of Macroeconomics, 2nd edition. [Electronic Version]. Retrieved from: (Links to an external site.)Links to an external site.

Demirel, D. (2014, July 23). How would various fiscal policies affect federal debt and the economy? (Links to an external site.)Links to an external site. [Blog post]. Retrieved from (Links to an external site.)Links to an external site.

Dombusch, R., Fischer, S. & Startz, R. (2001). Macroeconomics. New York: McGraw-Hill

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