Compare and contrast Keyne's and Friedman's theories against each other.I want to know which theory should the Federal Government follow during the current recession.

Asked on by paboo2007

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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Keynesianism and Monetarism (Friedman's theory) are completely opposed to one another.

Keynes argued that government needed to stimulate aggregate demand in order to end a recession.  He advocated increased government spending as the best way to do this (along with tax cuts).

Friedman argues that fiscal policy like Keynes advoactes is a bad idea.  To him, the only thing that the government should do is to increase the supply of money at an even rate.  He says that Keynesianism is more likely to cause inflation than to help the economy.

There's no way to know who's right and what the federal government should do.  Economists with much more education than I have disagree so there's no way I can know which is right.

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