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Essay / Research Paper Abstract
A 3 page research paper that discusses the economic theories of John Maynard Keynes and Milton Friedman. The writer indicates agreement with Larry Kudlow that aspects of both theories should be used in the current economic crisis. Bibliography lists 3 sources.
Page Count:
3 pages (~225 words per page)
File: D0_khkeyfri.rtf
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Unformatted sample text from the term paper:
response to the Great Depression, a British economist, John Maynard Keynes, devised an economic theory that argued that direct government intervention, via deficit spending, had the power to pull a
national economy out of recession and stop the downward spiral into a depressed economy. In other words, the intellectuals of this era concluded that the "price system cannot coordinate economic
activity," and, therefore, governments "should limit the freedom possessed by individuals to make their own decisions" (Hetzel 3). A fundamental tenet of Keynesian economics is the position that the
price system is not capable of ether allocating resources efficiently or ensuring macro economic stability (Hetzel 3). In brief, Keynesian economics proposes increased government spending, tax cuts and reducing interest
rates as the prime tools for fighting recession (Mandel and Dunham 56). In contrast to Keynes, Milton Friedman advocates "constraining government policy by rules in order to allow the
price system maximum latitude to work" (Hetzel 3). For example, Friedman proposed a rule "calling for the money stock to increase at a constant rate" (Hetzel 3). Friedmans economic theories
are basically a defense of free markets, which is a much more laissez faire approach to the economy that has limited government intervention as its key feature. In short, Friedman
believed that governmental manipulation of the supply of money and interest rates is much more influential on the state of the national economy than governmental fiscal policy. Friedmans theories were
overwhelmingly rejected until the 1970s when the "stagflation" predicted by Friedman materialized due to the failure of the "Keynesian diagnosis of cost-push inflation" and its "remedy of wage and price
controls" (Hetzel 2). In summary, the differences between Keynes and Friedman are multiple as they basically stand at opposite ends of an economic continuum. However, they share the similarity
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