Research Assignemnt About Hayek vs Keynes on Economic Recession (Essay Sample)
Compare and contrast the views of John Maynard Hayek and Friedrich August Keynes against each other on the topic of recession as whole, the causes of recession, and how recessions can be avoided.source..
Hayek vs Keynes on Economic Recession
Hayek vs Keynes on Economic Recession
The government develops macroeconomic goals that are aimed at ensuring that there is a sustainable economic growth in the nation. Economic growth is identified through a continuous growth of the gross domestic product (GDP) to meet the needs of the people. A recession occurs when the economy is experiencing a decline in the GDP for consecutive quarters of the economic period. The recession leads to a reduction in income to the people and unemployment in the nation. The decline in the disposable income in the market leads to a decrease in the number of products and services consumed by the public. The government is required to ensure that the households have required an income that will ensure a constant purchase of products from the firms in the economy. Governments develop monetary and fiscal policies that are aimed at increasing the amount of money supply to handle the economy recession (Friedman 2016). The financial industry is required to ensure that the strategies implemented deals with the changing supply and demand for money in the economy to handle cases of a recession in the economy. John Maynard Keynes and Friedrich August Hayek view on recession aim at ensuring that the policies implemented can avoid the reduction in economic development.
John Maynard Keynes Views on Recession
The recession in the economy requires proper measures in ensuring that it is properly handled towards the achievement of set long-term objectives by the government. According to Skousen (2009), John Maynard Keynes comes up with the Keynesian economic theory during the 1930s. According to the Keynesian theory during the recession period, the individuals tend to hold back spending due to the reduced performance of the economy. The government is required to focus on increasing the government expenditure while reducing the tax rate for an individual to increase the money supply in the market. Money held by the public leads to a severe breakdown in the nation due to uneven demand and supply of money. It is essential for the government to ensure that the people are encouraged to spend money despite the recession period to effectively handle the situation of the economy. The John Maynard Keynes views on recession were to focus on household investment for economic development rather than on government spending (Gillman, 2015). The households make up the large parts of the economy, thus developing plans that will ensure a sustainable performance of the people. Disposable income in the economy is required to be enough to ensure that the money is enough for expenditure and investment towards a sustainable economic growth in the nation. The money supply and demand require proper monetary policies that will regulate the performance of the economy. Monetary policies are required to provide the required amount of money for circulation in the economy (Borner, Brunetti & Weder 2016). Reduced money supply in the economy is the primary contributor to the recession in the economy where corporations are unable to acquire profits from production and increased rate of unemployment in the economy. Proper evaluation of the sectors that are holding money for the economy is crucial in coming up with plans that will offer required amount of money constant economic performance.
The government and people are required to focus on investment in the recession period to ensure that there is increased money circulation in the economy. The government is required to develop infrastructure projects that will provide employment and money to the economy for a steady performance of daily operations in the nation (Borner, Brunetti & Weder 2016). Recession lead...
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