Problem 9

Introduction

NEOCLASSICAL ECONOMIST: The neoclassical economist focuses on reducing the natural rate of unemployment. They believe that more than cyclic unemployment which occurs at recession, unemployment at potential GDP needs to be taken care of well. Neoclassical economists will not tend to see aggregate demand as a useful tool for reducing unemployment; after all, with a vertical aggregate supply curve determining economic output, then aggregate demand has no long-run effect.

KEYNESIAN ECONOMIST: The Keynesian perspective, focuses on advocating the government informing certain fiscal policies that might relate to expenditure cut or tax policies which economists formulate time to time to adjust the decrease or sudden increase in Aggregate Demand.