Keynesian Economics

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Martin Garnica
Macro Economics
October 18, 2010
Keynesian vs. Monetarist Keynesians and Monetarists agree that the problem that the economy confronts is not enough aggregate demand; however that’s the only thing that they agree on. Keynesians and Monetarists each have a different way on how to approach the problems that our economy faces. Although both Monetarist and Keynesians have well thought out strategies to boost the economy, I believe that Keynesian economics are more effective. There are three ways that Keynesians can boost aggregate demand. One way is to lower taxes on people. Once those taxes are lowered people’s paycheck become bigger so they have more money to spend therefore that increases aggregate demand. Another method that Keynesians believe works is raising taxes on people with low marginal propensity to consume and make transfer payments to people with high marginal propensity to consume. Examples of transfer payments would be Welfare payments and housing vouchers. Also, an increase in government spending helps increase aggregate demand. Keynesian economics were applied by Franklin Delano Roosevelt during the Great Depression. In the book Franklin Delano Roosevelt written by Russell Freedman it says that “Works Progress Administration (WPA) workers built railroads, airports, post offices, hospitals, playgrounds, and schools from Maine to California”.(p.95) The WPA was one of the New Deal Agencies. The New Deal increased government spending through many programs like the WPA, a program that helped employ “eight million people” (98). Roosevelt also invested in human capital through some of his relief programs. For example, through the program by the name of Civilian Conservation Corps (CCC) “Tens of thousands were taught to read and write and thousands went on to college.” (95) Through the CCC Roosevelt increased human capital which led to an increase in United States...
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