Congratulations! You have been appointed an economic policy advisor to the United States. You are told that the economy is significantly below its potential output and that the following will happen n

Congratulations! You have been appointed an economic policy advisor to the United States. You are told that the economy is significantly below its potential output and that the following will happen next year: World income will fall significantly and the price of oil will rise significantly, and the U.S. is an oil importer.

a) What kind of policies (under Fiscal policy) might you suggest to the government? Mention three.

b) Consider the economic principle held by Classical economists: The economy always returns to its potential in the long run. What are Keynes’s criticisms of this economic principle?

Use as many economic principles (from the textbook and other sources) as you can in answering the questions.

As a guideline, each of the 10 points will be derived from the following:

1. Post your answer (400-500 words) to the posted DQ responding to the matter asked, instead of repeating the question or not attending to the question. Substantive answers include making comments using concepts found in the assigned reading materials or offering examples from your experience. Hence merely providing a brief “yes, I agree” or “no, I do not agree” postings are not adequate posts
2. Write in correct grammar; any errors will translate to a deduction in points.
3. Check for the spelling; any errors will deduct points.
4. Your responses must be substantive that include your own thoughts, supported with research (at least two external sources other than textbook, and you must quote these sources).
5. You get one point when you respond to one of your classmates’ posts, also with substantive comments (100-200 words).
6. One more point when you respond to another classmate’s post (100-200 words).
7. One point for collaboration.  It is intended that your involvement in discussions be of a collaborative nature. Collaboration spirit is quite different from confrontation.
8. Deadline: due date for each DQ will be on Monday night 11.55pm, but you are free to make your comments prior to Monday night.  One point will be deducted for each day of late submission.
9. Creativity: offer a creative solutions or ideas or impact on other fields, in addition to the obvious socio-economic impacts of each topic.
10. Offer a future recommendation or alternative options for the future with regard to the topic in question.