Neoclassical View of Recessions

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

What is the Neoclassical View of Recessions? Neoclassical economists believe that the economy will rebound out of a recession or eventually contract during an expansion because prices and wage rates are flexible and will adjust either upward or downward to restore the...

Keynesian vs Neoclassical Macroeconomic Policy Recommendations

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

What are Keynesian vs Neoclassical Macroeconomic Policy Recommendations? Let’s summarize what neoclassical economists recommend for macroeconomic policy. Neoclassical economists do not believe in “fine tuning” the economy. They believe that a stable economic...

Government Spending – Explained

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

What is Government Spending? Government spending covers a range of services that the federal, state, and local governments provide. What is a Budget Deficit and Surplus? When the federal government spends more money than it receives in taxes in a given year, it runs a...

Effects of Discretionary Policy (Interest Rates)

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

How does Discretionary Fiscal Policy affect Interest Rates? Because fiscal policy affects the quantity that the government borrows in financial capital markets, it not only affects aggregate demand—it can also affect interest rates. In the chart below, the original...

Keynesian Perspective on Market Forces

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

What is the Keynesian Perspective on Market Forces? Ever since the birth of Keynesian economics in the 1930s, controversy has simmered over the extent to which government should play an active role in managing the economy. In the aftermath of the human devastation and...

Physical Capital Affects Productivity

by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy

How does Physical Capital Affect Productivity? Physical capital per person refers to the amount and kind of machinery and equipment available to help people get work done. Compare, for example, your productivity in typing a term paper on a typewriter to working on...