ECONOMICS – Daily Answer Writing Challenge, 16 July 2014

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ECONOMICS – Daily Answer Writing Challenge, 16 July 2014

1) Macroeconomics is usually approached via the outcomes of economic interaction in the following four markets -commodities, money, bond and labour markets. The classical economist focused on which three of the four markets? In which market does the loanable fund theory of interest rate determination of the classical economist focus and how is the interest rate is determined? The Neo Classical synthesis focus on which three markets? In which market the interest primarily determined in the liquidity preference theory? (300 words)

2) Compare monetarist and Keynesian views on the proper conduct of fiscal policy. For both monetarist and Keynesians, explain not only their conclusions regarding fiscal policy but also how these conclusions are related to their respective theories. (200 words)
3) Explain the concept of the natural rate of unemployment. What are the implications of Milton Friedman’s theory of the natural rate of unemployment for the effectiveness of economic stabilization policies? (200 words)