What are the similarities and differences on the views between the classical economists and keynes?

Question

Discuess the differences and similarities between the classical economists and Keynes in their views about how output, employment, and income are determined. What are the policy implications in each?

Answer 1

Basically there is a single difference between the classical and Keynesian set of economists. It occurs in one equation. In the classical economy all markets clear their goods. In other words, everything is set at a price that it could sell at.

Keynes said prices were "sticky" that people cannot instantly adjust prices and so distortions occur in the economy. Keynes replaced an employment formula with a price formula. Essentially Keynes said that aggregate nominal prices are fixed and occur at a higher price than the price to clear the goods market. This results in less employment than would occur in a non-distorted market. You can work and produce all you want, but you can't sell it. So managers produce less than they should and hire less than they could.

This results in an observation that the government can act as a substitute for the private sector in certain situations. This is not true in classical economics. In the Great Depression, the government took over the demand otherwise that would occur in the private sector.

A better observation is that real wages are sticky and prices may be to a lesser extent. This is important because sticky systems reasonably well do predict the economy while classical ones do not.

Nonetheless, in some circumstances, such as a change in technology, the results are very different. In Keynes, the immediate result is a reduction in employment, in the classical, it is an increase in the amount of work done and a reduction in prices. Both models seem to be correct depending on the time scale. The immediate effect does seem to be layoffs, but the long run effect is that work increases and prices fall.

Answer 2

What are the similarities and differences on the views between the classical economists and keynes?

Answer 3

Classical School of Economics initiated by Adam Smith, claims that the State shouldn't interfere to the Economy. Every economic agent should try to protect its own self-interest. By doing so, they are also acting in favor of the society's interest (even without being aware). So the economy will be balanced with an "invisible hand" and State intervention isn't needed.
On the other hand, Keynasian School debuted by John Maynard Keynes, claims that State must intervene to the economy in order to rise output and create employment. Therefore expansionary fiscal policies should be used by the Government.

Answer 4

One faith on earth only would not do because of the fact the concepts has limitless recommendations. So one similarity is they the two want one yet another. that's the questioning of actual Christians and Hindus. enable there be sharing; I combat over that situation. yet another similarity: Hindus think of their faith is the final, and Christians think of their faith is the final. that's only organic nevertheless. Wiser human beings paintings by using that nevertheless. i do no longer be attentive to lots approximately Hinduism so I shouldn't attempt to respond to this query. i be attentive to nevertheless that Hinduism has so lots extra Gods and memories than Christianity.