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If Keynes' Law applies during economic contractions and Say's Law applies during economic expansions, how will the three goals of macroeconomics be affected?

Answer :

If Keynes' law applies during economic contractions and Say's law applies during economic expansion, the three goals of macroeconomics will be affected differently depending on the economic conditions.

The three main goals of macroeconomics are economic growth, full employment, and stable prices. Keynes' law states that during economic contractions, government intervention is needed to stimulate demand and promote economic growth, while Say's law suggests that during economic expansion, supply-side policies are more effective in promoting growth.

If Keynes' law applies during economic contractions, the government may implement policies such as increased government spending or tax cuts to stimulate demand and boost economic growth. This can help to achieve the goal of full employment by creating more jobs and reducing unemployment rates.

However, these policies may also lead to inflation, which can negatively impact the goal of stable prices. The government may need to implement additional measures such as monetary policy to control inflation and maintain price stability.

On the other hand, if Say's law applies during economic expansion, supply-side policies such as reducing regulations or cutting taxes may be implemented to promote economic growth. These policies may also contribute to achieving the goal of full employment by creating more job opportunities.

However, supply-side policies may also contribute to income inequality and may not address the issue of stagnant wages for low-income workers. Therefore, the government may need to implement policies to address these issues and promote equitable growth.

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