One practical limitation of Keynesian economics is the challenge of implementing active economic policy quickly. One practical limitation of the Classical or Neoclassical model is that it suggests allowing the economy to self-correct in the long run, but recessions may last a very long time. For each challenge (limitation), discuss how severe you think these problems are? Explain, and provide an example.Your discussion should be at least 250 words in length, but not more than 500 words. Cite your work and provide references at the end.

The practical limitations of both Keynesian economics and the Classical or Neoclassical model are indeed significant and can have profound impacts on the economy.

Starting with Keynesian economics, the challenge of implementing active economic policy quickly is a severe one. This is because economic conditions can change rapidly and unexpectedly, and the government's ability to respond in a timely manner is crucial. For instance, during the 2008 financial crisis, the U.S. government's response was criticized for being too slow and not aggressive enough, which some argue exacerbated the recession. The bureaucratic nature of government often means that policy changes are slow and cumbersome, which can be detrimental in a rapidly changing economic environment. Therefore, this limitation of Keynesian economics is quite severe.

On the other hand, the Classical or Neoclassical model's suggestion of allowing the economy to self-correct in the long run also poses a significant challenge. While it is true that economies have a natural tendency to return to equilibrium over time, this process can be painfully slow, especially during severe recessions. For example, during the Great Depression of the 1930s, the U.S. economy took more than a decade to fully recover. This suggests that relying solely on the self-correcting nature of the economy can result in prolonged periods of economic hardship, making this a severe limitation of the Classical or Neoclassical model.

In conclusion, both Keynesian economics and the Classical or Neoclassical model have their limitations, and these challenges can be quite severe. Policymakers must therefore be aware of these limitations and strive to strike a balance between active intervention and allowing the economy to self-correct.

References:

1. Mankiw, N. G. (2015). Principles of economics. Cengage Learning.
2. Blinder, A. S., & Zandi, M. (2010). How the Great Recession was brought to an end. Moody's Analytics.
3. Romer, C. D. (1992). The Great Crash and the Onset of the Great Depression. The Quarterly Journal of Economics, 107(3), 789-816.