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Transcript
20th Century Economic Theorists • Recessions and depressions can occur from too little aggregate demand for goods and services • Inflation can occur because of too much demand for goods and services • Government can influence economic activity by influencing aggregate demand through fiscal and monetary policies • Fiscal policy (changes in government spending and taxes) is more powerful than monetary policy (changes in the money supply and interest rates) • The government’s power to influence the economy is limited and often ineffective • Consumers, business leaders, and investors are intelligent decision makers and take the effects of government policies into account in deciding on their behavior • People’s actions often offset the effects of government fiscal and monetary policies • Many theorists emphasize the role of forward looking expectations in affecting economic growth, inflation, and unemployment
