The following is a macroeconomic problem within an economy. Please write your paper solving each item listed in the problem in order. Your paper should be FIVE paragraphs with no less than 375 words, double spaced, and 11-point font. The first of the five paragraphs should be your proper introduction and the last should be your conclusion. You must use proper grammar, punctuation, and sentence structure. You should not need sources but if you use them, you must properly site those sources. Please save your paper to a PDF format and then submit it online by the due date and time. No other format is accepted. The macroeconomy is represented in the graphs above. The first is a Keynesian Neoclassical ADAS graph and the second is a Keynesian ADAS graph.
Based on the above graphs representing the current state of the economy, give options for achieving full employment and potential GDP, as well as the possible downsides of the options. Be sure to include the following items:
What is the main economic problem with the economy…recessionary gap or inflationary gap? Of the three macroeconomic goals, which is/are not currently being met in this economy?
According to the Classical model, what is the best policy for addressing the problem and the steps of Classical Economic thought that the economy goes through as the economy is corrected? What are the potential negative consequences of this approach?
According to the Keynesian model, how might FISCAL POLICY be used to achieve the identified goal(s)? You must identify two FISCAL POLICY tools. Who is responsible for Fiscal Policy? What are the potential negative consequences of this approach?
How might MONETARY POLICY be used to achieve the identified goal(s)? You must identify two Monetary Policy tools. Who is responsible for Monetary Policy? What are the negative consequences of this approach?
In your opinion…would you recommend using the Classical thought, Fiscal Policy and/or Monetary Policy? Why? Explain, in detail, your reasons.
