Reaction of keynes and friesman - Assignment Example

Reaction of Keynes and Friedman I am in favor of Friedman’s position. Economist Milton Friedman included a hypothesis of price and their fluctuations. Friedman centered his hypothesis on the notion of the innate state of joblessness and the constraints of public policy in steadying an economy during its extensive growth trend (Conerly 2012). I think identifying these constraints prevents the triggering of spiraling and negative inflation. In contrast, John Maynar Keynes’ position is increased consumption and demand to stabilizing the economy.

Keynes centered his position on the hypothesis of preferring sufficient liquidity for short-run rates of interest. I think this solution is only short term as Keynes seldom considers the measures and approaches other developed countries would take to curb the effect of inflation in the United States on their markets and economies (Conerly 2012).Keynes’ position relies on jobs, interest rates, and liquidity. When an economic turmoil exacerbates, creating jobs and lowering interest rates cannot prevent a full-blown depression.

Lowering interest rates to attract foreign investment can only go as low as 0%, which was the case in the United States in mid-2009 (Conerly 2012). From there, the Keynesian approach proves ineffective. On the other hand, Friedman’s position entails stabilizing the purchasing power of the private sector and collective households across the country. I agree with Friedman that the private sector plays a bigger role in stabilizing an economy than government policy during an economic crisis. In addition, the government is often unreliable when the interests of businesses are not in line with those of the government (Conerly 2012).

Works CitedConerly, Bill. Keynes vs. Friedman at the Fed. 2012. Forbes. Web. 11 Apr. 2014.