Question

Do you think the current President and Congress were taking Classical approach in their fiscal policies? Explain your answer.

Answer 1

Classical approach believes in self correcting power of market. It contends that government should not interfere in economic activities to restore equilibrium, instead government must leave everything to market.

But policies of president and congress do not match with policy prescription of Classical. President and congress actively and increasingly participated in economic activities by providing bailout packages and tax cuts. Expansionary fiscal policy was used by congress and president to correct disquilibrium in economy.

Thus, president and congress were not taking classical approach in their fiscal policies.