Suppose equilibrium GDP is less than full-employment output and the economy is in a recession...?

Monica Voltin: You have to be careful.1. The Keynesian's would say a loose money policy.http://en.wikipedia.org/wiki/Keynesian_economics2. The monetarists would say just keep the money supply growing at a constant rate and don't look at employment or GDP growth.http://en.wikipedia.org/wiki/Friedman's_k-percent_...3. The Austrian School says that any monetary policy is a sin; that nothing should be done; and that the economy should be allowed to work itself out.http://mises.org/misesreview_detail.aspx?control=5...4. The gold bugs go further and say the government should have no say in money creation at all. http://en.wikipedia.org/wiki/Private_currency(The Austrian School wants to abolish fractional reserve banking, which requires some government regulation)At one time, Keynesian theory was widely accepted. Then it fell out of favor. Now, everyone seems to be relying on it. So far, it seems to have worked, at least to the extent of ending the drop in GDP. But it still seem! s that many don't have enough faith in it to support a second stimulus package in the U.S. http://economicsofcontempt.blogspot.com/2009/07/se...http://economix.blogs.nytimes.com/2009/07/15/forge...though the economy is still at less than full employment:http://finance.yahoo.com/techticker/article/347764...http://www.sfgate.com/cgi-bin/blogs/nov05election/...http://abcnews.go.com/Business/story?id=8039651&pa...So which school of economists are you going to go with? I happen to be a salt-water person:http://en.wikipedia.org/wiki/Saltwater_and_freshwa...but you can't answer this question without making a choice....Show more

Derick Kinnard: Recession Equilibrium GDP is the place the economic equipment will settle with contemporary industry forces. If that's under complete employment GDP, it potential that the economic equipment will perform under complete employment. At tiers under complete employment, the economic equipment is in a recession.