Macroeconomic Coursework Essay Example | Topics and Well Written Essays - 2500 words

Macroeconomic Coursework - Essay Example In other words what macroeconomic theoretical models seek to accomplish by way of controlling or stimulating variables such as inflation or/and growth are sought to be accomplished in a more articulate manner by these representative agent models. Representative agent models are in fact some efforts of economists to model and represent the macro economy as if it were a single unit. These representative agent models are based on the basic tenets of the original models. On the other hand stimulative fiscal policy measures are adopted by governments in response to recessions or economic downturns. A recession, defined as two consecutive quarters of negative Gross Domestic Product (GDP) growth in a year, can be partially or wholly reversed by using a combination of macroeconomic measures or solutions such as fiscal or/and monetary policy measures. At least this is the belief among economists though there can be a lot of arguments to prove that it cannot be done as easily as it’s proposed. Representative agent models would necessarily require that some very stringent assumptions are satisfied before the model is adopted so that outcomes could be predicted with a degree of certainty. Thus all representative agent models based on classical/neoclassical, Keneysian/neo-Keneysian and monetary theories assume that fiscal stimulus programs could effectively boost economic growth during a recession or an economic downturn. However, those assumptions that they require as essential pre-conditions might be very difficult to fulfill though. Fiscal policy involves budgetary measures in which the government carries through a deficit budget in order to stimulate the economy by charging lower corporate taxes. In other words fiscal revenue in the given fiscal year will be less than government expenditure on projects. These projects are naturalluy intended to stimulate spending and subsequent economic growth (Ertl, 2008). When the government spends more than what it