Classical Vs Keynesian
I think that the Keynesian philosophy has a lot more valid aspects. At first I was wondering why Adam Smith would be known as the "father of modern economics", since he lived in the 1700's. I figured that Keynes, who lived during the 1900's, would have been more modern. After doing research, I saw that Keynes had a lot of the same views as Smith, and that Keynes wouldn't have probably came up with his own philosophy without the help of Smith's. I don't feel that either philosophy was wrong. Smith's Classical philosophy went along with his time period pretty much. If he could have seen the future I think he would have felt slightly different about certain things. Keynes philosophy goes along with modern day economics. These are some of things I learned about th
Capitalist, in particular supports Smith's policy. To fight a depression Keynes said that the government should spend a lot of money. Smith opposed any government intervention. Elastic prices, wages, and interest rates assure that real GDP will stabilize at the full-employment level was an argument of classical theory that was challenged by KeynesKeynes' theory is that the level of output, income and employment is determined by how much people are willing to spend on the nation's output of goods and services. Keynesian's believe the government should actively intervene in the economy to manage the level of demand, which are counter-cyclical demand management policies, or often known as demand management policies. Classical economists argue that no matter how much households save, businesses will always want to borrow every dollar for capital investment. Smith strongly favored anti-monopoly laws. The consumption function, a Keynesian principle, is when disposable income rises, household spending rises, but at a slower rate. Classical economists believed that the level of private investment depended solely on interest rates while Keynes believed that investment also depended on business expectations. According to Keynes, recessions are caused by not spending enough on goods, while spending too much money on goods causes inflation. This is why household savings also grow as income rises. According to Keynesian economics, inflexible wages and prices cause real GDP and employment to fall when aggregate demand decreases. John Maynard Keynes challenged the theories of classical economists in the great depression of the 1930sKeynes believed the general cause of the Great Depression in the 1930s was a collapse in aggregate demand. ------------------------------------------------------------------------**Bibliography**. According to Keynesian economics, the primary reason for business-cycle fluctuations is changes in investment expenditures.
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