The first theory I would like to bring to attention is the Keynesianism aggregate demand theory, which stresses the role that the fiscal policy can play in stabilizing the economy (). This theory implies that higher government spending in a recession is the solution to helping the economy recovery quicker. The theory also implies that it is an oversight to wait for markets. More in particular, Keynesian fiscal expenses are directed more to offset households’ and businesses’ boost of savings during a recession.
“Keynes' general theory of money was written in the 1930s, when there was ample evidence of the failing of the free market to achieve full employment. Faced with this mass unemployment, Keynes advocated government intervention (higher government spending) to stimulate a depressed economy” (). The desire in the Keynesian theory is expected upcoming sales with anticipated upcoming profit...
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...in frictionless perfectly competitive economies with generally complete markets subject to real shocks (random changes in technology or productivity), it makes the argument that cycles are consistent with competitive general equilibrium environments in which all agents are rational maximizes” ().RBC theorists found that the theory that GDP growth follows a random walk cannot be rejected. They argued that most of the changes in GDP were permanent, and that output growth would not revert to an underlying trend following a shock.
http://econ.economicshelp.org/2008/07/keynesian-vs-monetarist-theories.html The new classical and new Keynesian theories of the business cycle
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